On bidding with securities: Risk aversion and positive dependence

Vineet Abhishek, Bruce Hajek and Steven R. Williams

Games and Economic Behavior, 2015, vol. 90, issue C, 66-80

Abstract: DeMarzo et al. (2005) consider auctions in which bids are selected from a completely ordered family of securities whose values are tied to the resource being auctioned. The paper defines a notion of relative steepness of families of securities and shows that a steeper family provides greater expected revenue to the seller. Two assumptions are: the buyers are risk neutral; the random variables through which values and signals of the buyers are realized are affiliated. We show that this revenue ranking holds for the second price auction in the case of risk aversion. However, it does not hold if affiliation is relaxed to a less restrictive form of positive dependence, namely first order stochastic dominance (FOSD). We define the relative strong steepness of families of securities and show that it provides a necessary and sufficient condition for comparing two families in the FOSD case. All results extend to the English auction.

Keywords: Security bidding; Auction; Positive dependence; Risk aversion (search for similar items in EconPapers)
JEL-codes: D44 D82 G00 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:90:y:2015:i:c:p:66-80

DOI: 10.1016/j.geb.2015.02.004

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