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on Economic Design |
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Issue of 2019‒02‒04
four papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford |
| By: | von Wangenheim, Jonas |
| Abstract: | Evidence suggests that people evaluate outcomes relative to expectations. I analyze this expectation-based loss aversion (Köszegi and Rabin (2006, 2009)) in the context of dynamic and static auctions, where the reference point is given by the (endogenous) equilibrium outcome. If agents update their reference point during the auction, the arrival of information crucially affects equilibrium behavior. Consequently, I show that - even with independent private values - the Vickrey auction yields strictly higher revenue than the English auction, violating the well known revenue equivalence. Thus, dynamic loss aversion offers a novel explanation for empirically observed differences between these auction formats. |
| Keywords: | Vickrey auction,English auction,expectation-based loss aversion,revenue equivalence,dynamic loss aversion,personal equilibrium |
| JEL: | D03 D44 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fubsbe:20191&r=all |
| By: | Gentry, Matthew; Li, Tong; Lu, Jingfeng |
| Abstract: | We consider auctions with entry based on a general analytical framework we call the Arbitrarily Selective (AS) model. We characterize symmetric equilibrium in a broad class of standard auctions within this framework, in the process extending the classic revenue equivalence results of Myerson (1981), Riley and Samuelson (1981) and Levin and Smith (1994) to environments with endogenous and arbitrarily selective entry. We also explore the relationship between revenue maximization and efficiency, showing that a revenue maximizing seller will typically employ both higher-than-efficient reservation prices and higher-than-efficient entry fees. |
| JEL: | J1 |
| Date: | 2017–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:83664&r=all |
| By: | Daniel Kraehmer; |
| Abstract: | I study mechanism design settings with quasi-linear utility where the principal can provide agents with additional private information about their valuations beyond the private information they hold at the outset. I demonstrate that the principal can design information and a mechanism so as to fully extract the complete information first-best surplus if agents’ ex ante information only affects their beliefs about, yet not their valuations. Otherwise, the result holds if each agent’s initial private beliefs satisfy a spanning condition. |
| Keywords: | information design, mechanism design, quasi-linear utility, rent extraction |
| JEL: | D82 H57 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2018_011&r=all |
| By: | Jeroen (J.) Hinloopen (University of Amsterdam; CPB); Sander (A.M.) Onderstal (University of Amsterdam); Leonard Treuren (University of Amsterdam) |
| Abstract: | Using laboratory experiments, we compare the stability of bidding rings in the English auction and the first-price sealed-bid auction in a heterogeneous-value setting. In both a re-matching condition and a fixed-matching condition, we observe that biddings rings are more stable in the English auction than in the first-price sealed-bid auction. In both conditions, the first-price sealed-bid auction dominates the English auction in terms of average revenue and the revenue spread. The English auction outperforms the first-price sealed-bid auction in terms of efficiency. |
| Keywords: | Cartel stability; English auction; First-price sealed-bid auction; Laboratory experiments |
| JEL: | C92 D44 L41 |
| Date: | 2019–01–27 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20190009&r=all |