Open Access. Powered by Scholars. Published by Universities.®
Articles 1 - 7 of 7
Full-Text Articles in Economics
Countering The Winner’S Curse: Optimal Auction Design In A Common Value Model, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Countering The Winner’S Curse: Optimal Auction Design In A Common Value Model, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We characterize revenue maximizing mechanisms in a common value environment where the value of the object is equal to the highest of bidders’ independent signals. The optimal mechanism exhibits either neutral selection, wherein the object is randomly allocated at a price that all bidders are willing to pay, or advantageous selection, wherein the object is allocated with higher probability to bidders with lower signals. If neutral selection is optimal, then the object is sold with probability one by a deterministic posted price. If advantageous selection is optimal, the object is sold with probability less than one at a random price. …
Countering The Winner’S Curse: Optimal Auction Design In A Common Value Model, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Countering The Winner’S Curse: Optimal Auction Design In A Common Value Model, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We characterize revenue maximizing mechanisms in a common value environment where the value of the object is equal to the highest of bidders’ independent signals. If the object is optimally sold with probability one, then the optimal mechanism is simply a posted price, with the highest price such that every type of every bidder is willing to buy the object. A sufficient condition for the posted price to be optimal among all mechanisms is that there is at least one potential bidder who is omitted from the auction. If the object is optimally sold with probability less than one, then …
Revenue Guarantee Equivalence, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Revenue Guarantee Equivalence, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We revisit the revenue comparison of standard auction formats, including first-price, second-price, and English auctions. We rank auctions according to their revenue guarantees, i.e., the greatest lower bound of revenue across all informational environments, where we hold fixed the distribution of bidders' values. We conclude that if we restrict attention to the symmetric affiliated models of Milgrom and Weber (1982) and monotonic pure-strategy equilibria, first-price, second-price, and English auctions all have the same revenue guarantee, which is equal to that of the first-price auction as characterized by Bergemann, Brooks, and Morris (2017a). If we consider all equilibria or if we …
Optimal Auction Design In A Common Value Model, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Optimal Auction Design In A Common Value Model, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We study auction design when bidders have a pure common value equal to the maximum of their independent signals. In the revenue maximizing mechanism, each bidder makes a payment that is independent of his signal and the allocation discriminates in favor of bidders with lower signals. We provide a necessary and sufficient condition under which the optimal mechanism reduces to a posted price under which all bidders are equally likely to get the good. This model of pure common values can equivalently be interpreted as model of resale: the bidders have independent private values at the auction stage, and the …
Selling To Intermediaries: Optimal Auction Design In A Common Value Model, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Selling To Intermediaries: Optimal Auction Design In A Common Value Model, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We characterize revenue maximizing auctions when the bidders are intermediaries who wish to resell the good. The bidders have differential information about their common resale opportunities: each bidder privately observes an independent draw of a resale opportunity, and the highest signal is a sufficient statistic for the value of winning the good. If the good must be sold, then the optimal mechanism is simply a posted price at which all bidders are willing to purchase the good, and all bidders are equally likely to be allocated the good, irrespective of their signals. If the seller can keep the good, then …
Informationally Robust Optimal Auction Design, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Informationally Robust Optimal Auction Design, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
A single unit of a good is to be sold by auction to one of two buyers. The good has either a high value or a low value, with known prior probabilities. The designer of the auction knows the prior over values but is uncertain about the correct model of the buyers’ beliefs. The designer evaluates a given auction design by the lowest expected revenue that would be generated across all models of buyers’ information that are consistent with the common prior and across all Bayesian equilibria. An optimal auction for such a seller is constructed, as is a worst-case …
Multidimensional Private Value Auctions, Hanming Fang, Stephen Morris
Multidimensional Private Value Auctions, Hanming Fang, Stephen Morris
Cowles Foundation Discussion Papers
We consider parametric examples of two-bidder private value auctions in which each bidder observes her own private valuation as well as noisy signals about her opponent’s private valuation. In such multidimensional private value auction environments, we show that the revenue equivalence between the first and second price auctions breaks down and there is no definite revenue ranking; while the second price auction is always efficient allocatively, the first price auction may be inefficient and the inefficiency may increase as the signal becomes more informative; equilibria may fail to exist for the first price auction. We also show that auction mechanisms …