Time-Varyingness in Auction Breaks Revenue Equivalence

Yuma Fujimoto, Kaito Ariu and Kenshi Abe

Papers from arXiv.org

Abstract: Auction is applied for trade with various mechanisms. A simple but practical question is which mechanism, typically first-price or second-price auctions, is preferred from the perspective of bidders or sellers. A celebrated answer is revenue equivalence, where each bidder's equilibrium payoff is proven to be independent of auction mechanisms (and a seller's revenue, too). In reality, however, auction environments like the value distribution of items would vary over time, and such equilibrium bidding cannot always be achieved. Indeed, bidders must continue to track their equilibrium bidding by learning in first-price auctions, but they can keep their equilibrium bidding in second-price auctions. This study discusses whether and how revenue equivalence is violated in the long run by comparing the time series of non-equilibrium bidding in first-price auctions with those of equilibrium bidding in second-price auctions. We characterize the value distribution by two parameters: its basis value, which means the lowest price to bid, and its value interval, which means the width of possible values. Surprisingly, our theorems and experiments find that revenue equivalence is broken by the correlation between the basis value and the value interval, uncovering a novel phenomenon that could occur in the real world.

Date: 2024-10, Revised 2026-02
New Economics Papers: this item is included in nep-des, nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2410.12306 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2410.12306

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().