Auctions in which Losers Set the Price

Claudio Mezzetti and Ilia Tsetlin
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Ilia Tsetlin: INSEAD, Singaport

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: We study auctions of a single asset among symmetric bidders with affiliated values. We show that the second-price auction minimizes revenue among all efficient auction mechanisms in which only the winner pays, and the price only depends on the losers' bids. In particular, we show that the k-th price auction generates higher revenue than the second-price auction, for all k > 2. If rationing is allowed, with shares of the asset rationed among the t highest bidders, then the (t + 1)-st price auction yields the lowest revenue among all auctions with rationing in which only the winners pay and the unit price only depends on the losers' bids. Finally, we compute bidding functions and revenue of the k-th price auction, with and without rationing, for an illustrative example much used in the experimental literature to study first-price, second-price and English auctions.

Keywords: Auctions; Second-Price Auction; English Auction; k-th Price Auction; Affiliated Values; Rationing; Robust Mechanism Design (search for similar items in EconPapers)
JEL-codes: D44 D82 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2008
New Economics Papers: this item is included in nep-cta, nep-gth and nep-mkt
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Related works:
Journal Article: Auctions in which losers set the price (2009)
Working Paper: Auctions in which Losers Set the Price (2008)
Working Paper: Auctions in which Losers Set the Price (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:845

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