"Upping the ante": How to design efficient auctions with entry?

In the symmetric independent private value model, we revisit auctions with entry by adding two additional ingredients: difficulties to commit to the announced mechanism, in particular not to update the reserve price after bidders took their entry decisions, and seller's ex ante uncertainty on her reservation value which calls for flexibility. Shill bidding or ex post rights to cancel the sale may provide some valuable flexibility in second price auctions. However, both fail to be efficient since the seller may keep the good while it would be efficient to allocate it to the highest bidder. The English auction with jump bids and cancelation rights is shown to implement the first best in large environments. On the positive side, special emphasis is put on the equilibrium analysis of auctions with shill bidding and on a variety of associated new insights including counterintuitive comparative statics and a comparison with posted-prices.Dans le modèle symétrique à valeurs privées, nous revisitons les enchères avec entrée en ajoutant deux nouveaux ingrédients : les difficultés de s'engager sur le mécanisme annoncé, en particulier de s'engager sur le prix de réserve annoncé ex ante avant que les entrants potentiels n'aient pris leurs décisions et l'incertitude du vendeur sur sa valuation de réserve. Les enchères fantômes ou les droits d'annuler l'enchère peuvent apporter de la flexibilité. Cependant, ces comportements, souvent tolérés dans le monde des enchères, présentent des inconvénients et y sont associés de nouveaux insights contre-intuitifs par rapport à la théorie standard

Shills and snipes

Online auctions with a fixed end-time often experience a sharp increase in bidding towards the end despite using a proxy-bidding format. We provide a novel explanation of this phenomenon under private values. We study a correlated private values environment in which the seller bids in her own auction (shill bidding). Bidders selected randomly from some large set arrive randomly in an auction, then decide when to bid (possibly multiple times) over a continuous time interval. A submitted bid arrives over a continuous time interval according to some stochastic distribution. The auction is a continuous-time game where the set of players is not commonly known, a natural setting for online auctions. We show that there is a late-bidding equilibrium in which bids are delayed to the latest instance involving no sacrifice of probability of bid arrival, but shill bids fail to arrive with positive probability, and in this sense optimal late bidding serves to snipe the shill bids. We show conditions under which the equilibrium outcome is unique. Our results suggest that under private values, the case against shill-bidding might be weak

Bidder Migration and Its Price Effects on Auctions

Auctions are often not independent from each other, and the movement of bidders across different auctions is one of the key linkages. We propose different measures of bidder movements (which we call bidder migration in this paper) and how such migration affects the price outcome of later auctions. Moreover, we identify two potentially confounding effects: the learning effect where bidders learn to become more sophisticated bidders, hence driving down the price of later auctions; and the desperation effect where bidders, in a hope to obtain the product that they previous couldn’t win, tend to increase the prices. We empirically investigated these effects using bidding history data from eBay and Generalized Linear Model specifications. We further discussed potential applications of bidder migration for online auction platforms, such as bidder segmentation, dynamic promotions, and shill bidder detection. These bidder migration measures can be provided to internet auction sellers as a value-added service

Intimidation or Impatience? Jump Bidding in On-line Ascending Automobile Auctions

We run a large field experiment with an online company specializing in selling used automobiles via ascending auctions. We manipulate experimentally the maximum amount which bidders can bid above the current standing price, thus affecting the ease with which bidders can engage in jump bidding. We test between the intimidation vs. costly bidding hypotheses of jump bidding by looking at the effect of these jump-bidding restrictions on average seller revenue. We find evidence consistent with costly bidding in one market (Texas), but intimidation in the other market (New York). This difference in findings between the two markets appears partly attributable to the more prominent presence of sellers who are car dealers in the Texas market.

Essays in Applied Microeconomics

Cette thèse en microéconomie appliquée se compose de trois chapitres, chacun abordant une question différente. Le premier chapitre, « La distribution séquentielle en présence de fraude », montre comment les entreprises peuvent exploiter le moment de la diffusion des contenus afin d’atténuer les effets de la fraude numérique, dans un monde où un certain piratage est inévitable. À travers un modèle, cet article fournit une explication claire de la façon dont une firme peut faire obstacle à la fraude à travers un changement de la distribution séquentielle du produit. En l’absence de fraude, les profits des entreprises sont indépendants de la manière dont le contenu est mis en vente. Cependant, lorsque la fraude représente une menace réelle, l’entreprise peut en atténuer les effets en choisissant de manière stratégique la part du produit qui est offert à chaque période. Cela permet de changer la valeur du produit pour les consommateurs et de rendre la fraude moins attractive de ce point de vue. L’entreprise en situation de monopole bénéficie de la libération de contenu en deux périodes différentes d’une manière asymétrique qui trouvent des analogies dans des exemples réels tels que le marché des outils logiciels spécialisés ou des émissions de télévision. Le deuxième chapitre, « L’offre complice dans les enchères à valeur commune », présent les effets d’un type d’enchère frauduleuse appelée « enchère complice ». Cette fraude consiste à placer des enchères anonymes sur ordre du vendeur en vue de faire monter artificiellement le prix de l’objet vendu. Nous concevons un modèle simple pour comprendre les incitations du vendeur à enchérir de manière complice dans une enchère anglaise à valeur commune, dans laquelle l’information privée des participants suit une distribution discrète. Nous montrons comment le caractère discret de la distribution affecte le profit espéré du fait d’enchérir de manière complice pour le vendeur ex-ante. Nous montrons aussi comment le vendeur révise ses enchères complices à partir de l’information qu’il reçoit à mesure que l’enchère se déroule. Nous trouvons que si le nombre de signaux est faible, le vendeur peut gagner à ne pas participer, même lorsque les autres participants sont myopes. Par ailleurs, et quel que soit le nombre de signaux dans l’enchère, si le nombre de participants est assez élevé, le fait d’avoir la possibilité de mettre en œuvre une enchère complice a toujours pour effet de détériorer le profit espéré du vendeur. Le troisième chapitre, « Le confort des médecins et le choix des césariennes », est co-écrit avec Shagun Khare et Alan Acosta. Cet article analyse les causes qui pourraient expliquer le taux élevé de césarienne à Buenos Aires, en Argentine, qui excède largement la recommandation de l’Organisation mondiale de la Santé (OMS). L’hypothèse d’une demande induite par le fournisseur, qui prévoit plus de césariennes que nécessaire du point de vue médical, pourrait expliquer cet écart. Dans cet article co-écrit avec Shagun Khare et Alan Acosta, nous étudions un aspect des incitations des médecins à stimuler la demande : le confort. A partir d’une enquête menée auprès de femmes enceintes à Buenos Aires, nous regardons si les chances qu’une femme fasse l’objet d’une césarienne dépend du moment de l’accouchement, en particulier s’il s’agit d’un jour travaillé ou non. En laissant de côté les césariennes planifiées, nous trouvons que le confort compte, mais seulement dans les hôpitaux privés. Nous trouvons aussi qu’une femme qui déclare préférer une césarienne à une naissance naturelle a de plus grandes chances de recourir à une césarienne dans les hôpitaux privés. Nos résultats montrent aussi que l’environnement institutionnel joue un rôle déterminant sur la manière dont le confort des médecins et les préférences des mères influencent ces choix.This thesis in applied microeconomics is composed of three chapters, each one addressing a different question. The first chapter, “Sequential distribution in the presence of Piracy”, shows how firms can exploit the timing of the release of digital content as a way to mitigate the effects of piracy, in a world where some piracy is unavoidable. We develop an analytical model where a monopolist produces a particular good, and it can choose the time at which its product is available to consumers. On top of deciding on prices, the monopolist also chooses the share of the product it releases at each period. In the absence of piracy, firm’s profits are independent of the way in which content is released. However, when piracy is a real threat, the firm can soften its effect by strategically selecting the share of the product offered in each period, changing consumers’ valuation and making piracy less attractive from their perspective. The monopolist benefits from releasing content in two different periods in an asymmetric way which find analogies in real life examples such as the market of specialised software tools or of TV shows. The second chapter, “Shill bidding in common value auctions”, presents the effects of a particular cheating environment in common value auctions. Shill bidding consists of placing anonymous bids on the seller’s behalf to artificially drive up the prices of the auctioned item. We build a simple model to understand the incentives a seller has to shill bid in an English common value auction where the bidders’ private information is drawn from a discrete distribution. We show how the discreteness affects the seller’s ex-ante expected gain of shill bidding, and we also show how the seller updates his shill bid based on the new information he receives as the auction goes on. We find that if the number of signals is low, the seller might be better off refraining from participating even when bidders are fully myopic. Moreover, for any number of signals in the auction, if the number of participants is sufficiently high, the shill bidding strategy always deteriorates the seller’s expected profits. The third chapter, “Physician convenience and cesarean section delivery”, is co-authored with Shagun Khare and Alan Acosta. This paper analyses the causes that might explain the high rate of cesarean section in Buenos Aires, Argentina, that far exceeds the World Health Organization recommendation. The supplier-induced demand hypothesis, which predicts more c-section deliveries than otherwise medically needed, might be the reason for this disparity. In this paper, using a survey of pregnant women in Buenos Aires, we study one aspect of the physician’s incentives to induce demand: convenience. We look at whether a woman’s chance of getting a c-section depends on the period of delivery, i.e. whether it is a working day or not. Setting aside scheduled c-sections, we find that convenience matters, but only in private hospitals. We also find that women who state that they prefer c-sections over natural births have a higher chance of having a c-section in private hospitals. While physicians’ convenience and mothers’ preferences do matter, our research finds that the institutional environment plays a defining role in how much these matters

The econometrics of auctions with asymmetric anonymous bidders

We consider standard auction models when bidders' identities are not observed by the econometrician. First, we adapt the definition of identifiability to a framework with anonymous bids and we explore the extent to which anonymity reduces the possibility to identify private value auction models. Second, in the asymmetric independent private value model which is nonparametrically identified, we generalize Guerre, Perrigne and Vuong's estimation procedure [Optimal Nonparametric Estimation of First-Price Auctions, Econometrica 68 (2000) 525-574] and study the asymptotic properties of our multi-step kernel-based estimator. Third a test for symmetry is proposed. Monte Carlo simulations illustrate the practical relevance of our estimation and testing procedures for small data sets.Nous considérons des enchères standards lorsque l'identité des enchérisseurs n'est pas observée par l'économétre. D'abord nous adaptons la définition d'identifiabilité à un environnement avec des soumissions anonymes et nous explorons dans quelle mesure il est possible d'identifier le modèle à valeur privé. Ensuite dans le modèle asymétrique à valeurs indépendantes, qui est identifé de façon non-paramétrique, nous généralisons la procédure d'estimation de Guerre, Perrigne and Vuong [Optimal Nonparametric Estimation of First-Price Auctions, Econometrica 68 (2000) 525-574] et nous étudions les propriétés asymptotiques de notre estimateur à plusieurs étapes utilisant des noyaux. Finalement, nous proposons un test de symétrie. Des simulations de Monte Carlo illustrent l'utilité pratique de ces procédures d'estimation et de test pour des échantillons de petite taille

Essays in optimal auction design

Auctions are an ancient economic institution. Since Vickrey (1961), the development of auction theory has lead to an extremely detailed description of the often desirable characteristics of these simple selling procedures, in the process explaining their enduring popularity. Given the pervasiveness of auctions, the question of how a seller should engineer the rules of these mechanisms to maximize her own profits is a central issue in the organization of markets. The seminal paper of Myerson (1981) shows that when facing buyers with Independent Private Values (IPVs) a standard auction with a specifically selected reserve price (or prices) is optimal, that is, maximizes a seller's expected profits among all conceivable selling mechanisms. In this model, it is assumed that the buyers have perfect information as to the existence of gains from trade. We shall argue that the consequences of this assumption for the design of the optimal auction are not well understood, which motivates our analysis. The three essays of this thesis relax the `known seller valuation' assumption by examining the optimal auction program when the seller (and principal) holds private information representing her reservation value for the good. In the first essay we provide an original technique for comparing ex ante expected profits across mechanisms for a seller facing N>1 potential buyers when all traders hold private information. Our technique addresses mechanisms that cannot be ranked point-by-point through their allocation rules using the Revenue Equivalence Theorem. We find conditions such that the seller's expected profits increase in the slope of each buyer's allocation probability function. This provides new intuition for the fact that a principal does not benefit from holding private information under risk neutrality. Monopoly pricing induces steep probability functions so the seller/principal benefits from announcing a fixed price, and implicitly her private information. An application is presented for the well known k double auction of the bilateral trade literature. In the second and third essays of this thesis, we extend the above framework to allow for informational externalities. Specifically, we allow for the situation in which the seller's private information represents a common value component in buyers' valuations. Thus the seller's private information (say regarding the quality of the good) is of interest to bidders independently of any strategic effects. In recent work Cai, Riley and Ye (2007) have demonstrated that a seller who holds private information about the quality of a good faces an extra consideration in designing an auction; the reserve price signals information to bidders. In a separating equilibrium signalling is costly in the sense that reserves are higher than would be optimal under complete information. We examine the returns to the seller in an English auction from using different types of secret reserve regimes. We find that immediate disclosure of a reserve is preferable to announcement after the auction in the form of a take-it-or-leave-it offer to the winning bidder. Sale occurs less often during the auction for a given reserve price strategy under secret reserve regimes, which increases the incentive for the seller to report more favourable information though the reserve price offer. Separating equilibria involving later announcement therefore generate even lower expected profits to the seller (signalling is more costly) than under immediate disclosure. In the third essay we compare the benchmark signalling equilibrium of immediate disclosure to a screening regime which we call the Right of Refusal. In this extreme form of a secret reserve the seller never announces the reserve price, she simply accepts or rejects the auction price. We find that the Right of Refusal dominates immediate disclosure if the seller's valuation is a sufficient statistic for the private information of interest. Thus a seller with market-relevant private preference information can benefit from not exercising monopoly price setting power. The result also provides conditions under which a competitive screening equilibrium is more efficient than a signalling mechanism. Broadly speaking, screening is better when the common value aspect in the preferences of the informed and uninformed parties are `aligned', and potential gains from trade to the uninformed party are significant. We believe this conclusion to be of particular interest to the design of privatization schemes

Essays in optimal auction design

Auctions are an ancient economic institution. Since Vickrey (1961), the development of auction theory has lead to an extremely detailed description of the often desirable characteristics of these simple selling procedures, in the process explaining their enduring popularity. Given the pervasiveness of auctions, the question of how a seller should engineer the rules of these mechanisms to maximize her own profits is a central issue in the organization of markets. The seminal paper of Myerson (1981) shows that when facing buyers with Independent Private Values (IPVs) a standard auction with a specifically selected reserve price (or prices) is optimal, that is, maximizes a seller's expected profits among all conceivable selling mechanisms. In this model, it is assumed that the buyers have perfect information as to the existence of gains from trade. We shall argue that the consequences of this assumption for the design of the optimal auction are not well understood, which motivates our analysis. The three essays of this thesis relax the `known seller valuation' assumption by examining the optimal auction program when the seller (and principal) holds private information representing her reservation value for the good. In the first essay we provide an original technique for comparing ex ante expected profits across mechanisms for a seller facing N>1 potential buyers when all traders hold private information. Our technique addresses mechanisms that cannot be ranked point-by-point through their allocation rules using the Revenue Equivalence Theorem. We find conditions such that the seller's expected profits increase in the slope of each buyer's allocation probability function. This provides new intuition for the fact that a principal does not benefit from holding private information under risk neutrality. Monopoly pricing induces steep probability functions so the seller/principal benefits from announcing a fixed price, and implicitly her private information. An application is presented for the well known k double auction of the bilateral trade literature. In the second and third essays of this thesis, we extend the above framework to allow for informational externalities. Specifically, we allow for the situation in which the seller's private information represents a common value component in buyers' valuations. Thus the seller's private information (say regarding the quality of the good) is of interest to bidders independently of any strategic effects. In recent work Cai, Riley and Ye (2007) have demonstrated that a seller who holds private information about the quality of a good faces an extra consideration in designing an auction; the reserve price signals information to bidders. In a separating equilibrium signalling is costly in the sense that reserves are higher than would be optimal under complete information. We examine the returns to the seller in an English auction from using different types of secret reserve regimes. We find that immediate disclosure of a reserve is preferable to announcement after the auction in the form of a take-it-or-leave-it offer to the winning bidder. Sale occurs less often during the auction for a given reserve price strategy under secret reserve regimes, which increases the incentive for the seller to report more favourable information though the reserve price offer. Separating equilibria involving later announcement therefore generate even lower expected profits to the seller (signalling is more costly) than under immediate disclosure. In the third essay we compare the benchmark signalling equilibrium of immediate disclosure to a screening regime which we call the Right of Refusal. In this extreme form of a secret reserve the seller never announces the reserve price, she simply accepts or rejects the auction price. We find that the Right of Refusal dominates immediate disclosure if the seller's valuation is a sufficient statistic for the private information of interest. Thus a seller with market-relevant private preference information can benefit from not exercising monopoly price setting power. The result also provides conditions under which a competitive screening equilibrium is more efficient than a signalling mechanism. Broadly speaking, screening is better when the common value aspect in the preferences of the informed and uninformed parties are `aligned', and potential gains from trade to the uninformed party are significant. We believe this conclusion to be of particular interest to the design of privatization schemes

The effectiveness of using static features in identifying scam genres

Thesis details a cybercrime classification framework stemming from a mixed methodological approach, which is both top down and bottom up and is designed to be multidisciplinary and adaptable across sectors.Master by Research of Mathematical SciencesVariation in scam classification is regularly identified as a primary cause of discrepancy in victim report data resulting in unsuccessful scam identification and insufficient rates of interception by law enforcement, which results in the low prosecution rate of scammers. The result of such discrepancies lead to complex concerns, such as the under reporting of scam incidence, and reduced rates of successful follow up by investigative and enforcement agencies consequential to difficulties in making correct referrals. Without a shared and common lexicon of scam labels and descriptions, communication between investigative agencies and cross-border cooperation is obstructed. With no compatible comprehension of the scam lexicon, timely progression in scam-case management leading to the identification, tracking and interception of scammer communications cannot be realised. Ambiguities leading to interpretational impedances are aiding scammers by enabling their scams in cross-jurisdictional and multi-national platforms. If the wide variety of known scam types could be condensed to recognisable and traceable instances, the business models that scammers use could be identified and future scamming events predicted, monitored, and interrupted. Following a mixed methodology, this research aims to address some of these concerns. This is achieved by clustering scam descriptions and partitioning them into scam types, called scam genres. The result of which reveals homogeneous groups of scam cases and allows for the assessment of the effectiveness of using static features in identifying scam types. Second to this, identification of the most suitable model for reducing scam cases into the fewest number of clusters with the least number of scam cases within in each cluster at an accuracy level of at least 95% is achieved. Through the use of hierarchical clustering, this research grouped publically available scams into homogeneous clusters of scam genres. Two-hundred and seventy-seven scams from 38 separate categories of scam classification were condensed into as few as 7-clusters of scam genre. Following a mixed methodological, grounded theoretical approach and using discriminant function analysis, 82 static features were derived from the 277 scam descriptions analysed. Of the 82 static features derived, it was concluded that only 68 significantly predicted scam type and explained 95% of the total variation found in scam case assignment. The most significant static features determined to be crucial to any scamming campaign and useful in identifying the type of scam genre a scam case belongs to were; what the scam offered, the role of the victim, the goal of the scammer and the method of scam introduction. The results of this research provide empirical evidence of the inconsistent use of definitions across jurisdictions in scam descriptions, and will contribute to the development of a uniform lexicon of scamming terminology as well as become foundational to further research on the impact of scams for law enforcement, the public and private sector, the community and the individual