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Ranking asymmetric auctions: Filling the gap between a distributional shift and stretch

Rene Kirkegaard ()

Games and Economic Behavior, 2014, vol. 85, issue C, 60-69

Abstract: I consider first-price auctions (FPA) and second-price auctions (SPA) with two asymmetric bidders. The FPA is known to be more profitable than the SPA if the strong bidder's distribution function is convex and the weak bidder's distribution is obtained by truncating or horizontally shifting the former. In this paper, I employ a new mechanism design result to show that the FPA remains optimal if the weak bidder's distribution falls between the two benchmarks in a natural way. The same conclusion holds if the strong bidder's distribution is concave, but with a vertical shift replacing the horizontal shift. A result with a similar flavor holds if the strong bidder's distribution is neither convex nor concave. The dispersive order and the star order prove useful in comparing the weak bidder's distribution to the benchmarks. A key step establishes a relationship between these orders and reverse hazard rate dominance.

Keywords: Asymmetric auctions; Dispersive order; Revenue ranking; Star order (search for similar items in EconPapers)
JEL-codes: D44 D82 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1016/j.geb.2014.01.016

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