A multi-agent simulation approach to farmland auction markets : repeated games with agents that learn

The focus of this thesis is to better explore and understand the effects of agent interactions, information feedback, and adaptive learning in a repeated game of bidding in farmland auction markets. This thesis will develop a multi-agent model of farm-land auction markets based on data from the Saskatchewan Dark Brown Soil Zone of the Canadian Prairies. Several auction types will be modeled and data will be gathered on land transactions between farm agents to ascertain which auction type (if any) is best suited for farmland markets. Specifically, the model gathers information for 3 types of sealed-bid auctions, and 1 English auction and compares them on the basis of efficiency, price information revelation, stability, and with respect to repeated bidding and agent learning. The effects of auction choice on macro-level indicators, such as farm exits, retirement, financial stability, average productivity, farm size, and participation were unknown at the outset of this thesis because of the complex dynamic nature of the environment. I find that the chosen learning mechanism employed here affects both price and variance of prices in all auctions. I also find that the second-price-sealed-bid auction generates the most perceived surplus, most equitable share of surplus, and also decreases uncertainty in the common-value element of prices. A priori it was believed that auction choice would have an impact on pricing efficiency, price levels, and shares of surplus generated from auctions as predicted by theoretical works. Surprisingly, auction choice does not influence market structure or evolution

An Investigation Report on Auction Mechanism Design

Auctions are markets with strict regulations governing the information available to traders in the market and the possible actions they can take. Since well designed auctions achieve desirable economic outcomes, they have been widely used in solving real-world optimization problems, and in structuring stock or futures exchanges. Auctions also provide a very valuable testing-ground for economic theory, and they play an important role in computer-based control systems. Auction mechanism design aims to manipulate the rules of an auction in order to achieve specific goals. Economists traditionally use mathematical methods, mainly game theory, to analyze auctions and design new auction forms. However, due to the high complexity of auctions, the mathematical models are typically simplified to obtain results, and this makes it difficult to apply results derived from such models to market environments in the real world. As a result, researchers are turning to empirical approaches. This report aims to survey the theoretical and empirical approaches to designing auction mechanisms and trading strategies with more weights on empirical ones, and build the foundation for further research in the field

How to Allocate R&D (and Other) Subsidies: An Experimentally Tested Policy Recommendation

This paper evaluates how R&D subsidies to the business sector are typically awarded. We identify two sources of ine_ciency: the selection based on a ranking of individual projects, rather than complete allocations, and the failure to induce competition among applicants in order to extract and use information about the necessary funding. In order to correct these ine_- ciencies we propose mechanisms that include some form of an auction in which applicants bid for subsidies. Our proposals are tested in a simulation and in controlled lab experiments. The results suggest that adopting our proposals may considerably improve the allocation

License auctions with exit (and entry) options: Alternative remedies for the exposure problem

Inspired by some spectrum auctions, we consider a stylized license auction with incumbents and one entrant. Whereas the entrant values only the bundle of several units (synergy), incumbents are subject to non-increasing demand. The seller proactively encourages entry and restricts incumbent bidders. In this framework, an English clock auction gives rise to an exposure problem that distorts efficiency and impairs revenue. We consider three remedies: a (constrained) Vickrey package auction, an English clock auction with exit option that allows the entrant to annul his bid, and an English clock auction with exit and entry option that lifts the bidding restriction if entry failed

Using Auction Theory to Inform Takeover Regulation

This paper focuses on certain mechanisms that govern the sale of corporate assets. Under Delaware law, when a potential acquirer makes a serious bid for a target, the target's Board of Directors is required to act as would "auctioneers charged with getting the best price for the stock- holders at a sale of the company." The Delaware courts' preference for auctions follows from two premises. First, a firm's managers should maximize the value of their shareholders' investment in the company. Second, auctions maximize shareholder returns. The two premises together imply that a target's board should conduct an auction when at least two firms would bid sums that are nontrivially above the target's prebid market price.Auctions; Takeovers

A Proxy Bidding Mechanism that Elicits all Bids in an English Clock Auction Experiment

This paper reconsiders experimental tests of the English clock auction. We point out why the standard procedure can only use a small subset of all bids, which gives rise to a selection bias. We propose an alternative yet equivalent format that makes all bids visible, and apply it to a “wallet auction” experiment. Finally, we test the theory against various alternative hypotheses, and compare the results with those that would have been obtained if one had used the standard procedure. Our results confirm that the standard tests are subject to a significant selection bias

Competitive Bidding in Auctions with Private and Common Values

The objects for sale in most auctions display both private and common value characteristics. This salient feature of many real-world auctions has not yet been incorporated into a strategic analysis of equilibrium bidding behavior. This paper reports such an analysis in the context of a stylized model in which bidders receive a private value signal and an independent common value signal. We show that more uncertainty about the common value results in lower efficiency and higher profits for the winning bidder. Information provided by the auctioneer decreases uncertainty, which improves efficiency and increases the seller's revenue. These positive effects of public information disclosure are stronger the more precise the information. Efficiency and revenues are also higher when more bidders enter the auction. Since our model nests both the private and common value case it may lead to an improved specification of empirical models of auctions.Auctions, inefficiencies, information disclosure, competition.

Collusion via signaling in open ascending auctions with multiple objects and complementarities

Collusive equilibria exist in open ascending auctions with multiple objects, if the number of bidders is sufficiently small relative to the number of objects, even with large complementarities in the buyers' utility functions. The bidders collude by dividing the objects among themselves, while keeping the prices low. Hence the complementarities are not realized