Social and Behavioral Sciences Commons^™

Allocating Vehicle Registration Permits, Massimiliano Landi, Domenico Menicucci

Research Collection School Of Economics

We compare social welfare, consumer surplus and profits in two different institutional settings in which an item whose quantity is fixed and controlled (vehicle registration permit) is allocated to the buyers of a complementary good (car). In the first setting, which resembles the way in which vehicle registration permits are allocated in Singapore, the central planner runs a uniform price auction for permits in which the consumers who bid the highest receive the permits and pay the highest losing bid. Then each winning consumer purchases a car from a seller. In the alternative setting, the central planner first allocates the …

Ambiguity And Ambiguity Attitudes Across Auctions, Cary Deck, Paan Jindapon, Tigran Melkonyan, Mark Schneider

ESI Working Papers

Studies of ambiguity perceptions and attitudes are moving beyond the Ellsberg urn to examine people’s responses to ambiguity in naturally occurring events, games, and financial markets. In this study, we measure ambiguity perceptions and attitudes for market prices and allocations in four classical auction formats (first-price and second-price sealed bid auctions, English and Dutch clock auctions). We find ambiguity attitudes, representing individual preferences, are stable across auctions. However, the perceived ambiguity surrounding auction prices is lowest for English clock auctions which are obviously strategyproof (OSP), followed by second-price auctions which are strategyproof (SP), followed by a tie between first-price and …

How Do Digital Advertising Auctions Impact Product Prices?, Alessandro Bonatti, Dirk Bergemann, Nicholas Wu

Cowles Foundation Discussion Papers

We ask how the advertising mechanisms of digital platforms impact product prices. We present a model that integrates three fundamental features of digital advertising markets: (i) advertisers can reach customers on and off-platform, (ii) additional data enhances the value of matching advertisers and consumers, and (iii) bidding follows auction-like mechanisms. We compare data-augmented auctions, which leverage the platform’s data advantage to improve match quality, with managed campaign mechanisms, where advertisers’ budgets are transformed into personalized matches and prices through auto-bidding algorithms. In data-augmented second-price auctions, advertisers increase off-platform product prices to boost their competitiveness on-platform. This leads to socially efficient …

How Do Digital Advertising Auctions Impact Product Prices?, Dirk Bergemann, Alessandro Bonatti, Nick Wu

Cowles Foundation Discussion Papers

We ask how the advertising mechanisms of digital platforms impact product prices. We present a model that integrates three fundamental features of digital advertising markets: (i) advertisers can reach customers on and off-platform, (ii) additional data enhances the value of matching advertisers and consumers, and (iii) bidding follows auction-like mechanisms. We compare data-augmented auctions, which leverage the platform’s data advantage to improve match quality, with managed campaign mechanisms, where advertisers’ budgets are transformed into personalized matches and prices through auto-bidding algorithms. In data-augmented second-price auctions, advertisers increase off-platform product prices to boost their competitiveness on-platform. This leads to socially efficient …

Managed Campaigns And Data-Augmented Auctions For Digital Advertising, Dirk Bergemann, Alessandro Bonatti, Nicholas Wu

Cowles Foundation Discussion Papers

We develop an auction model for digital advertising. A monopoly platform has access to data on the value of the match between advertisers and consumers. The platform support bidding with additional information and increase the feasible surplus for on-platform matches. Advertisers jointly determine their pricing strategy both on and off the platform, as well as their bidding for digital advertising on the platform. We compare a data-augmented second-price auction and a managed campaign mechanism. In the data-augmented auction, the bids by the advertisers are informed by the data of the platform regarding the value of the match. This results in …

Why Have There Been No Rich Women Artists? Examining The Gender Price Discount In The Contemporary Auction Market For Early Twentieth Century Mexican Avant-Garde Art, Lucy P. Bloomstran

Scripps Senior Theses

This paper examines the gender price discount for early twentieth-century Mexican avant-garde art in the contemporary auction market. A premium for art by men is established through the econometric analysis of a dataset of auction transactions taking place at major American and Mexican auction houses between 2000 and 2022. After this price discount for women’s art is established, a deep delve into gender discrimination in the creation and exhibition of Mexican Muralism and Surrealism is presented to provide possible art historical explanations for the results of the regression analysis.

Dynamic Double Auctions: An Analysis Of Secondary Sneaker Market And Its Future As An Nft Marketplace, Chris Zhu

Honors Theses

A theoretical analysis of a dynamic double auction over time shows that greater market density can result in more aggressive trading strategies from buyers and sellers. In addition, my model suggests a fast price discovery period initially, with impatient investors having a more aggressive approach. I confirm these results using resale sneaker data from the StockX website for five deadstock sneakers. I find that market density is positively correlated with bid prices, and the bid-ask spread decreases over time during the price discovery period. However, the results also indicate that sellers price in additional transaction costs and lags in their …

Identification And Inference In First-Price Auctions With Risk Averse Bidders And Selective Entry, Xiaohong Chen, Matthew Gentry, Tong Li, Jingfeng Lu

Cowles Foundation Discussion Papers

We study identification and inference in first-price auctions with risk averse bidders and selective entry, building on a flexible entry and bidding framework we call the Affiliated Signal with Risk Aversion (AS-RA) model. Assuming that the econometrician observes either exogenous variation in the number of potential bidders (N) or a continuous instrument (z) shifting opportunity costs of entry, we provide a sharp characterization of the nonparametric restrictions implied by equilibrium bidding. Given variation in either competition or costs, this characterization implies that risk neutrality is nonparametrically testable in the sense that if bidders are strictly risk averse, then no risk …

Opportunity Cost, Inattention And The Bidder's Curse, David J. Freeman, Erik O. Kimbrough, J. Philipp Reiss

Economics Faculty Articles and Research

Auction winners sometimes suffer a “bidder’s curse”, paying more for an item at auction than the fixed price charged for an identical item by other sellers. This seemingly irrational behavior is puzzling because the information necessary to avoid overpaying would appear to be readily available to bidders, yet they seem to ignore it. To understand this behavior, we consider the bidders’ decisions whether to acquire information about the fixed price before bidding, in the presence of opportunity costs. Our theory introduces costly information acquisition into an auction model, with a fixed price aftermarket selling an identical good. When information about …

A Computational And Experimental Examination Of The Fcc Incentive Auction, Logan Gantner

Computational and Data Sciences (PhD) Dissertations

In 2016, the Federal Communications Commission debuted a new auction mechanism, the Incentive Auction, with the intention of obtaining high frequency television broadcasting spectrum, repurposing it for cellular use, and reselling these licenses at profitable prices. In designing this process, the traditional mechanism used for spectrum auctions, the Simulta- neous Multiple Round Auction (SMR), was modified in order to speed the process. This new mechanism, the Incentive Forward Auction (IFA), intended to reduce the number of rounds per auction by lumping similar spectrum licenses together. However, the IFA discourages straightforward bidding strategies and can result in bidders committing more in …

On The Existence Of Equilibrium In Bayesian Games Without Complementarities, Idione Meneghel, Rabee Tourky

Cowles Foundation Discussion Papers

This paper presents new results on the existence of pure-strategy Bayesian equilibria in specified functional forms. These results broaden the scope of methods developed by Reny (2011) well beyond monotone pure strategies. Applications include natural models of first-price and all-pay auctions not covered by previous existence results. To illustrate the scope of our results, we provide an analysis of three auctions: (i) a first-price auction of objects that are heterogeneous and imperfect substitutes; (ii) a first-price auction in which bidders’ payoffs have a very general interdependence structure; and (iii) an all-pay auction with non-monotone equilibrium.

On The Existence Of Equilibrium In Bayesian Games Without Complementarities, Idione Meneghel, Rabee Tourky

Cowles Foundation Discussion Papers

In a recent paper, Reny (2011) generalized the results of Athey (2001) and McAdams (2003) on the existence of monotone strategy equilibrium in Bayesian games. Though the generalization is subtle, Reny introduces far-reaching new techniques applying the fixed point theorem of Eilenberg and Montgomery (1946, Theorem 5). This is done by showing that with atomless type spaces the set of monotone functions is an absolute retract and when the values of the best response correspondence are non-empty sub-semilattices of monotone functions, they too are absolute retracts. In this paper, we provide an extensive generalization of Reny (2011), McAdams (2003), and …

On The Existence Of Equilibrium In Bayesian Games Without Complementarities, Idione Meneghel, Rabee Tourky

Cowles Foundation Discussion Papers

This paper presents new results on the existence of pure-strategy Bayesian equilibria in specified functional forms. These results broaden the scope of methods developed by Reny (2011) well beyond monotone pure strategies. Applications include natural models of first-price and all-pay auctions not covered by previous existence results. To illustrate the scope of our results, we provide an analysis of three auctions: (i) a first-price auction of objects that are heterogeneous and imperfect substitutes; (ii) a first-price auction in which bidders’ payoffs have a very general interdependence structure; and (iii) an all-pay auction with non-monotone equilibrium.

Informed Entry In Auctions, Diego Aycinena, Hernán Bejerano, Lucas Rentschler

ESI Publications

We examine entry decisions in first-price and English clock auctions with participation costs. Potential bidders observe their value and report maximum willingness to pay (WTP) to participate. Entry occurs if revealed WTP (weakly) exceeds the randomly drawn participation cost. We find no difference in WTP between auction formats, although males have a higher WTP for first-price auctions. WTP is decreasing in the number of potential bidders, but this reduction is less than predicted and small in magnitude.

Information Effects In Uniform Price Multi-Unit Dutch Auctions, Joy A. Buchanan, Steven Gjerstad, David Porter

Economics Faculty Articles and Research

We design a multi-unit descending-price (Dutch) auction mechanism that has applications for resource allocation and pricing problems. We address specific auction design choices by theoretically and experimentally determining optimal information disclosure along two dimensions. Bidders are either informed of the number of bidders in the auction, or know that it is one of two possible sizes; they also either know the number of units remaining for sale or are unaware of how many units have been taken by other bidders. We find that revealing group size decreases bids, and therefore revenue, if units remaining are not shown. When group size …

Art Arbitrage - Violations Of The Law Of One Price Created By Fine Art Auctions, Amy Liu

Undergraduate Economic Review

Although fine art is becoming increasingly popular as investment, its price determination is relatively opaque. This paper expands upon the work of Pesando (1993) and Pesando and Shum (2007) concerning the law of one price in the art auction industry. By examining the sale history of silkscreen prints from Andy Warhol’s 1970 series Flowers, this paper controls for the physical characteristics of particular artwork and seeks to determine the likelihood of sale and price differentials created by specific auction environments. This paper further examines the extent to which auction houses take into account these auction environments when setting presale …

Are Subjects Making Financial Decisions In Lab Auctions Or Are They Just Gambling?, Cary Deck, Jungmin Lee, Javier Reyes

Economics Faculty Articles and Research

Optimal bidding strategies in first-price and Dutch auctions are theoretically isomorphic but depend on bidder risk attitudes. However, laboratory experiments consistently find different behaviour between auction formats. This article explores whether the notion in psychology that financial and gambling risks are viewed differently can explain the discrepancy. Ultimately, the evidence does not support this hypothesis, but a bidder's propensity to gamble is associated with how much risk he takes in both auctions whereas his propensity to take financial risks is not. The results suggest that subjects may view themselves as gambling in laboratory auctions rather than making financial decisions.

An Empirical Analysis Of Consumer Behavior In The Online Auction Marketplace, Calvin Salter

All Theses

The purpose of this paper is to analyze a unique data set pertaining to eBay auctions, in particular auctions of the first generation iPad. This analysis will give some interpretations about consumer behavior in the consumer electronics market on eBay, especially how the reputation of sellers and the shipping price that sellers charge affects the final selling price of an item. Other economics variables are analyzed to provide a broader picture of pricing determinants. Reputation is an important mechanism to consider in any market. However, reputation in the eBay market is particularly important because buyers do not interact with the …

Buyer Alliances As Countervailing Power In Wic Infant-Formula Auctions, David E. Davis

David E. Davis

Buyer Alliances As Countervailing Power In Wic Infant-Formula Auctions, David E. Davis

David E. Davis

Collusive Bidding In The Fcc Spectrum Auctions, Peter Cramton, Jesse Schwartz

Jesse A. Schwartz

This paper describes the bid signaling that occurred in many of the FCC spectrum auctions. Bidders in these auctions bid on numerous spectrum licenses simultaneously, with bidding remaining open on all licenses until no bidder is willing to raise the bid on any license. Simultaneous open bidding allows bidders to send messages to their rivals, telling them on which licenses to bid and which to avoid. This “code bidding” occurs when one bidder tags the last few digits of its bid with the market number of a related license. We examine how extensively bidders signaled each other with retaliating bids …

Improving Bid Efficiency For Humanitarian Food Aid Procurement, Aniruddha Bagchi, Jomon Aliyas Paul, Michael J. Maloni

Jomon A. Paul

The competitive bid process used by the US Department of Agriculture (USDA) to procure food supplies and transportation services for humanitarian food aid is subject to bidder gaming that can increase prices and deter competition. Additionally, suppliers and carriers are matched after bid submission, preventing synergies from coordinated planning. Given these concerns, we determine the optimal auction mechanism to minimize gaming then justify pre-bid planning between suppliers and carriers using properties of the cost distribution functions. We operationalize these changes with a uniform price auction. The improved mechanism should deter gaming, enhance bid participation, and increase delivered food aid volumes.

Valuation Structure In First-Price And Least-Revenue Auctions: An Experimental Investigation, Diego Aycinena, Rimvydas Baltaduonis, Lucas Rentschler

Economics Faculty Publications

In many auctions the valuation structure involves both private and common value elements. Existing experimental evidence (e.g. Goeree and Offerman in Am. Econ. Rev. 92(3):625–643, 2002) demonstrates that first-price auctions with this valuation structure tend to be inefficient, and inexperienced subjects tend to bid above the break-even bidding threshold. In this paper, we compare first-price auctions with an alternative auction mechanism: the least-revenue auction. This auction mechanism shifts the risk regarding the common value of the good to the auctioneer. Such a shift is desirable when ex post negative payoffs for the winning bidder results in unfulfilled contracts, as is …

Horizontal Product Differentiation In Auctions And Multilateral Negotiations, Charles J. Thomas, Bart J. Wilson

Economics Faculty Articles and Research

We experimentally compare first-price auctions and multilateral negotiations after introducing horizontal product differentiation into a standard procurement setting. Both institutions yield identical surplus for the buyer, a difference from prior findings with homogeneous products that results from differentiation's influence on sellers' pricing behaviour. The data are consistent with this finding being driven by concessions from low-cost sellers in response to differentiation reducing their likelihood of being the buyer's surplus-maximizing trading partner. Further analysis shows that introducing product differentiation increases the intensity of price competition among sellers, which contrasts with the conventional wisdom that product differentiation softens competition.

Second Chance Offers In Auctions, Aniruddha Bagchi, Brett Katzman, Timothy Mathews

Aniruddha Bagchi

Essays On Mechanism Design And The Informed Principal Problem, Nicholas C. Bedard

Electronic Thesis and Dissertation Repository

Three models of a privately informed contract designer (a principal) are examined. In the first, I study how much private information the principal wants to acquire before offering a contract to an agent. Despite allowing her to acquire all information for free, I prove in a general environment that there is a nontrivial set of parameters for which it is strictly suboptimal for the principal to be completely informed, regardless of the continuation equilibrium following any information acquisition choice. This result holds even when the principal is able to employ the most general mechanisms available and, in particular, when she …

Implementing The Optimal Provision Of Ecosystem Services, Stephen Polasky, David Lewis, Andrew Plantinga, Erik Nelson

Economics Department Working Paper Series

Many ecosystem services are public goods whose provision depends on the spatial pattern of land use. The pattern of land use is often determined by the decisions of multiple private landowners. Increasing the provision of ecosystem services, while beneficial for society as a whole, may be costly to private landowners. A regulator interested in providing incentives to landowners for increased provision of ecosystem services often lacks complete information on landowners’ costs. The combination of spatially-dependent benefits and asymmetric cost information means that the optimal provision of ecosystem services cannot be achieved using standard regulatory or payment for ecosystem services (PES) …

Auctions, Shyam Sunder

Shyam Sunder

No abstract provided.

How To Maximize The Profit For Bidder And Seller In A Sealed-Bid Second-Price Auction, Wei Yu

Honors Theses

With a history of more than 2500 years, auctions have long been used to negotiate the exchange of goods and commodities. In an auction, bidders compete with rivals by submitting bids depending on their personal evaluations of the goods. The good is allocated to the bidder who offers the highest bid. There are many different types of auctions, but four major ones are primarily concerned by economists and researchers--the English auction, the Dutch auction, the sealed-bid first-price auction and the sealed-bid second-price auction. My thesis mainly focuses on the characteristics of the sealed-bid second-price auction, with both continuous and discrete …

Two Cheers For The Fcc's Mobility Fund Reverse Auction, Scott J. Wallsten

Scott J. Wallsten

The United States held its first competitive bidding, or “reverse auction,” for universal service subsidies in September 2012. While it is far too early to investigate whether this national auction generated improvements in mobile voice and broadband service in underserved areas, it is not too soon to evaluate the auction itself. This paper investigates the outcome of the Mobility Fund Phase 1 Auction (Auction 901) and considers what we could learn from it for universal service and for future planned reverse auctions, such as the upcoming incentive auction, which aims to reallocate spectrum from broadcasters to those who place a …