Efficiency and Revenue in Asymmetric Auctions

Kyungmin Kim and Youngwoo Koh
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Kyungmin Kim: Emory University
Youngwoo Koh: Hanyang University

Korean Economic Review, 2019, vol. 35, 371-391

Abstract: We study the efficiency and revenue properties of first- and second-price auctions in an environment where bidders’ values are drawn from different binary distributions. We identify a necessary and sufficient condition for a first-price auction to induce an efficient allocation. The condition reveals the source of allocative inefficiencies in asymmetric firstprice auctions. We further show that the seller’s revenue is higher in a second-price auction than it is in a first-price auction whenever allocations in the two auction formats are efficient. We highlight how the difference in different bidder types’ beliefs induces the results.

Keywords: Asymmetric Auctions; Revenue Equivalence; Ex Ante Bidder Asymmetry (search for similar items in EconPapers)
JEL-codes: C72 D44 D82 (search for similar items in EconPapers)
Date: 2019
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