REVEALED PREFERENCE AND ACTIVITY RULES IN DYNAMIC AUCTIONS

Lawrence M. Ausubel and Oleg Baranov (oleg.baranov@colorado.edu)

International Economic Review, 2020, vol. 61, issue 2, 471-502

Abstract: Activity rules—constraints that limit bidding in future rounds based on past bids—are intended to limit strategic bidding delays in high‐stakes auctions. This article provides a general treatment of activity rules. Traditional point‐based rules are effective for homogeneous goods and reasonably suited for substitute goods. However, they are simultaneously too strong and too weak for general environments; they allow parking, while sometimes preventing straightforward bidding. We prove that the activity rule operationalizing the generalized axiom of revealed preference (GARP) is essentially the unique rule that enforces the Law of Demand while enabling straightforward bidding and never producing “dead ends.”

Date: 2020
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