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Asymmetric auctions (1998)
| Venue: | REVIEW OF ECONOMIC STUDIES |
| Citations: | 155 - 2 self |
BibTeX
@ARTICLE{Maskin98asymmetricauctions,
author = {Eric Maskin and John Riley},
title = { Asymmetric auctions},
journal = {REVIEW OF ECONOMIC STUDIES},
year = {1998},
pages = {413--438}
}
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Abstract
The revenue-equivalence theorem 1 for auctions predicts that expected seller revenue is independent of the bidding rules, as long as equilibrium has the properties that the buyer with the highest reservation price wins and any buyer with the lowest possible reservation price has zero expected surplus. Thus, in particular, the two most common auction institutions- the open "English " auction and the sealed high-bid auction- are equivalent despite their rather different strategic properties. This strong prediction of equivalence seems at odds, however, with the empirical observation that rarely is any given kind of commodity sold through more than one sort of auction. Thus, for example, art is nearly always auctioned off according to the English rules, whereas job contracts are normally awarded through sealed bids. Admittedly, in the public sector, there have been a few attempts to use both methods (lumber contracts in the Pacific Northwest) or to switch from one to the other (Treasury Bills). But changes have typically met great resistance. This is also in conflict with theory, since a corollary of the revenue equivalence theorem is that the expected surplus for any buyer is the same in the two auctions.
Keyphrases
asymmetric auction reservation price win lumber contract treasury bill possible reservation price sealed bid english rule bidding rule pacific northwest strong prediction public sector seller revenue revenue-equivalence theorem expected surplus revenue equivalence theorem sealed high-bid auction auction predicts empirical observation great resistance open english auction common auction institution whereas job contract different strategic property
