Utility Equivalence in Sealed Bid Auctions and the Dual Theory of Choice Under Risk

Oscar Volij ()

Economic theory and game theory from Oscar Volij

Abstract: This paper analyzes symmetric, single item auctions in the private values framework, with buyers whose preferences satisfy the axioms of Yaari's (1987) dual theory of choice under risk. It is shown that when their valuations are independently and identically distributed, buyers are indifferent among all the auctions contained in a big family of mechanisms which includes the standard auctions. It is also shown that in the linear equilibria of the sealed bid double auction, as the degree of players' risk aversion grows arbitrarily large, the ex post inefficiency of the mechanism tends to vanish.

Keywords: Auctions; non-expected utility; risk aversion. (search for similar items in EconPapers)
JEL-codes: D44 D81 (search for similar items in EconPapers)
Date: 1999-03-05, Revised 1999-03-25
New Economics Papers: this item is included in nep-mic and nep-pol
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Citations: View citations in EconPapers (1)

Published in Economics Letters, 76(2), 231--237, 2002

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