Revenue Equivalence Revisited

The conventional wisdom in the auction design literature is that first price sealed bid auctions tend to make more money while ascending auctions tend to be more efficient. We re-examine these issues in an environment in which bidders are allowed to endogenously choose in which auction format to participate. Our findings are that more bidders choose to enter the ascending auction than the first price sealed bid auction and this extra entry is enough to make up the revenue difference between the formats. Consequently, we find that both formats raise approximately the same amount of revenue. They also generate efficiency levels and bidder earnings that are roughly equivalent across mechanisms though the earnings in the ascending might be slightly higher. In expected utility terms though, we find that the expected utility of entering a first price sealed bid auction is greater than entering an ascending for any risk averse bidder suggesting that we are seeing “overentry” into the ascending auctions

An Agent Based Market Design Methodology for Combinatorial Auctions

Auction mechanisms have attracted a great deal of interest and have been used in diverse e-marketplaces. In particular, combinatorial auctions have the potential to play an important role in electronic transactions. Therefore, diverse combinatorial auction market types have been proposed to satisfy market needs. These combinatorial auction types have diverse market characteristics, which require an effective market design approach. This study proposes a comprehensive and systematic market design methodology for combinatorial auctions based on three phases: market architecture design, auction rule design, and winner determination design. A market architecture design is for designing market architecture types by Backward Chain Reasoning. Auction rules design is to design transaction rules for auctions. The specific auction process type is identified by the Backward Chain Reasoning process. Winner determination design is about determining the decision model for selecting optimal bids and auctioneers. Optimization models are identified by Forward Chain Reasoning. Also, we propose an agent based combinatorial auction market design system using Backward and Forward Chain Reasoning. Then we illustrate a design process for the general n-bilateral combinatorial auction market. This study serves as a guideline for practical implementation of combinatorial auction markets design.Combinatorial Auction, Market Design Methodology, Market Architecture Design, Auction Rule Design, Winner Determination Design, Agent-Based System

Anomalies in Auction Choice Behavior

Ivanova-Stenzel and Salmon (2004a) established some interesting yet puzzling results regarding bidders’ preferences between auction formats. The finding is that bidders strongly prefer the ascending to the first price sealed bid auction on a ceteris paribus basis but they are not willing to pay up to an entry price for entering into an ascending auction instead of a first price that would equalize the profits between the two. While it was found that risk aversion on the part of the bidders could resolve this anomaly the claim that risk aversion drives overbidding in first price auctions is somewhat controversial. In this study we examine two competing explanations for the observed behavior; loss aversion and “clock aversion”, i.e. a dislike for some aspect of the clock based bidding mechanism. We find that neither alternative explanation can account for bidders’ auction choice behavior leaving risk aversion as the only un-falsified hypothesis

PRICES IN SEQUENTIAL AUCTIONS: PRELIMINARY EVIDENCE FROM AUSTRALIAN RARE BOOK AUCTIONS

This paper examines price paths in sequential ascending auctions of identical rare books in Australia. Economic theory is inconclusive but suggests prices in sequential auctions of identical objects should follow flat or rising paths. The empirical literature is in several ways unsatisfactory, but points most commonly to falling price paths. Data from rare book auctions promise to overcome some of the problems in the empirical literature. A preliminary examination of rare book auction data from Australia indicates prices tended to be equal in sequential auctions of identical books in the 1980's and 1990's, and unequal in the 1970's. These results are consistent with the conjecture that more mature auction markets feature flatter price paths in sequential auctions of identical assets. Rare book auctions are a context in which further progress on sequential auctions is likely.

Revenue Equivalence Revisited

The conventional wisdom in the auction design literature is that first price sealed bid auctions tend to make more money while ascending auctions tend to be more efficient. We re-examine these issues in an environment in which bidders are allowed to endogenously choose in which auction format to participate. Our findings are that more bidders choose to enter the ascending auction than the first price sealed bid auction and this extra entry is enough to make up the revenue difference between the formats. Consequently, we find that both formats raise approximately the same amount of revenue. They also generate efficiency levels and bidder earnings that are roughly equivalent across mechanisms though the earnings in the ascending might be slightly higher. In expected utility terms though, we find that the expected utility of entering a first price sealed bid auction is greater than entering an ascending for any risk averse bidder suggesting that we are seeing “overentry†into the ascending auctions.bidder preferences; private values; sealed bid auctions; ascending auctions; endogenous entry

Field Experiments on the Effects of Reserve Prices in Auctions: More Magic on the Internet

This paper presents experimental evidence on the effects of minimum bids in first-price, sealed-bid auctions. The auction experiments manipulated the minimum bids in a preexisting market on the Internet for collectible trading cards from the game Magic: the Gathering. They yielded data on a number of economic outcomes, including the number of participating bidders, the probability of sale, the levels of individual bids, and the auctioneerç—´ revenues. The benchmark theoretical model tested here is the classic auction model described by Riley and Samuelson (1981), with symmetric, risk-neutral bidders with independent private values. The data verify a number of the predictions of the theory. A particularly interesting result shows that many bidders behave strategically, anticipating the effects of the reserve price on others?bids.

An Efficient Asynchronous Peer to Peer Auction using Yao Oblivious Transfer

Distributed electronic auctions are increasingly preferred over centralized electronic auctions today. The success of peer-to-peer file sharing networks has made distributed electronic auctions a possibility. Due to trust and conflict of interest issues with centralized auctioneer systems, multiple auctioneers in distributed roles are preferred. However, there is a possibility of auctioneer node collusion [16] and auctioneer-bidder collusion and auctioneer-seller collusion in such mechanisms. To overcome these problems, a new peer-to-peer auction protocol [17] with auctioneers forming auctioneer groups has been proposed. This protocol keeps the auctioneers honest by ensuring that no single auctioneer in the group has absolute control over the auction process. But, it leads to multiple bid comparisons and thus increases redundancy. It also fails to enforce a secure bid comparison method and hence fails to provide privacy of bids. This thesis presents a modified version of this protocol where the oblivious transfer method [14] is used to solve the Yao millionaires\u27 problem [22] that arises between two auctioneer groups when they have to compare bids. Additionally, a 2nd price mechanism in which only the second highest bid is known to all the auctioneer groups except for the auctioneer group which holds the highest bid, ensures that no unnecessary bid comparisons are made between auctioneer groups. Hence, the result is an efficient auction protocol which is iterative, asynchronous, 2nd price and based on a peer to peer mechanism