Virtue of Simplicity in Asymmetric Auctions

Shraman Banerjee () and Swagata Bhattacharjee ()
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Shraman Banerjee: Department Of Economics, Shiv Nadar University
Swagata Bhattacharjee: Department Of Economics, Ashoka University

No 2023-01, Working Papers from Shiv Nadar University, Department of Economics

Abstract: In single object auctions with asymmetric bidders, the Myerson Optimal auction is difficult to implement because of its informational requirements, complexity, and a possible discouragement effect on the bidders. This paper experimentally studies the performance of a "Simple" auction (Hartline and Roughgarden, 2009) vis-a-vis Optimal auction. We find that Simple auction revenue- approximates Optimal auction better than what the theory predicts: under weak asymmetry the revenue difference is not statistically significant. We explore the bidding behavior and show that the high type bidders get discouraged in Optimal auction. We also explore the role of cognitive ability in the bidding behavior.

Keywords: Optimal Auction; Simple Auction; Asymmetric Bidders; Experiment. (search for similar items in EconPapers)
JEL-codes: C90 D44 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2023-02-02
New Economics Papers: this item is included in nep-cta, nep-des, nep-exp and nep-gth
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