Coordination with Independent Private Values: Why Pedestrians Sometimes Bump into Each Other

Consider an extensive‐form mechanism, run by an auctioneer who communicates sequentially and privately with bidders. Suppose the auctioneer can deviate from the rules provided that no single bidder detects the deviation. A mechanism is credible if it is incentive‐compatible for the auctioneer to follow the rules. We study the optimal auctions in which only winners pay, under symmetric independent private values. The first‐price auction is the unique credible static mechanism. The ascending auction is the unique credible strategy‐proof mechanism.

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Soft Floors in Auctions

Management Science ◽

10.1287/mnsc.2018.3164 ◽

2019 ◽

Vol 65 (9) ◽

pp. 4204-4221 ◽

Cited By ~ 3

Author(s):

Robert Zeithammer

Keyword(s):

The Other ◽

Symmetric Equilibrium ◽

Revenue Equivalence ◽

Bidding Strategies ◽

Reserve Prices ◽

Private Values ◽

Price Auction ◽

Winning Bidder ◽

Second Price Auction ◽

Independent Private Values

Several of the auction-driven exchanges that facilitate programmatic buying of internet display advertising have recently introduced “soft floors” in addition to standard reserve prices (called “hard floors” in the industry). A soft floor is a bid level below which a winning bidder pays his own bid instead of paying the second-highest bid as in a second-price auction most ad exchanges use by default. This paper characterizes soft floors’ revenue-generating potential as a function of the distribution of bidder independent private values. When bidders are symmetric (identically distributed), soft floors have no effect on revenue, because a symmetric equilibrium always exists in strictly monotonic bidding strategies, and standard revenue-equivalence arguments thus apply. The industry often motivates soft floors as tools for extracting additional expected revenue from an occasional high bidder, for example a bidder retargeting the consumer making the impression. Such asymmetries in the distribution of bidder preferences do not automatically make soft floors profitable. This paper presents two examples of tractable modeling assumptions about such occasional high bidders, with one example implying low soft floors always hurt revenues because of strategic bid-shading by the regular bidders, and the other example implying high soft floors can increase revenues by making the regular bidders bid more aggressively. This paper was accepted by Juanjuan Zhang, marketing.

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Auctions for Concessions in Natural Monopoly Industries in the Context of Tariff Regulation

Voprosy Ekonomiki ◽

10.32609/0042-8736-2008-4-141-157 ◽

2008 ◽

pp. 141-157

Author(s):

R. Martusevich

Keyword(s):

Selection Criterion ◽

Natural Monopoly ◽

Business Strategies ◽

Bidding Theory ◽

Franchise Bidding ◽

Private Values ◽

Independent Private Values

Tenders for infrastructure concessions are on the agenda in Russia. The theory of the competitive biddings for concessions originates from the idea of "competition for the field", further developed by H. Demsetz into the franchise bidding theory. But so far, tenders for concessions which took place in different infrastructure sectors have questioned whether the number of bidders was high enough to expect the results (tenders outcomes) predicted by Demsetz. In the article this question is answered basing on the theory of auctions with independent private values and with the price as a single selection criterion under different business strategies of the bidders. Some recommendations are proposed. The necessity as well as some limitations of usage of such tenders’ results for natural monopolists’ tariff regulation are shown.

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Asymmetric Auctions with Resale

The American Economic Review ◽

10.1257/aer.98.1.87 ◽

2008 ◽

Vol 98 (1) ◽

pp. 87-112 ◽

Cited By ~ 73

Author(s):

Isa Hafalir ◽

Vijay Krishna

Keyword(s):

Asymmetric Auctions ◽

Monopoly Pricing ◽

General Revenue ◽

Private Values ◽

Price Auction ◽

Second Price Auction ◽

Expected Revenue ◽

Second Price Auctions ◽

Independent Private Values

We study first- and second-price auctions with resale in a model with independent private values. With asymmetric bidders, the resulting inefficiencies create a motive for post-auction trade which, in our model, takes place via monopoly pricing—the winner makes a take-it-or-leave-it offer to the loser. We show (a) a first-price auction with resale has a unique monotonic equilibrium; and (b) with resale, the expected revenue from a first-price auction exceeds that from a second-price auction. The inclusion of resale possibilities thus permits a general revenue ranking of the two auctions that is not available when these are excluded. (JEL D44)

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Entry Deterrence in Dynamic Second-Price Auctions

American Economic Journal Microeconomics ◽

10.1257/mic.20140137 ◽

2016 ◽

Vol 8 (2) ◽

pp. 168-201

Author(s):

Xiaogang Che ◽

Tilman Klumpp

Keyword(s):

Social Welfare ◽

Entry Deterrence ◽

Private Values ◽

Price Auction ◽

Second Price Auction ◽

Second Price Auctions ◽

Independent Private Values

We examine a dynamic second-price auction with independent private values and sequential costly entry. We show that delayed revelation equilibria exist in which some buyers place coordinated low early bids. These buyers revise their bids to reflect their true valuations just prior to the end of the auction. Compared to the benchmark immediate revelation equilibrium, in which buyers bid their valuations immediately after entry, fewer high-value bidders enter on expectation in the delayed revelation equilibria. Delayed revelation of buyer values decreases social welfare, but is necessary for bidders to have a strict participation incentive. (JEL D44, D82, D83)

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