Asymptotic properties of equilibrium in discriminatory and uniform price ipv multi-unit auctions

This paper confronts the tractability problems that accompany IPV auction models with multi-unit bidder demands. Utilizing a first order approach, the asymptotic properties of symmetric equilibria in discriminatory and uniform price auctions are derived. It is shown that as the number of bidders increases, equilibrium bids converge to valuations in both discriminatory auctions and uniform price auctions where the price paid is determined by the lowest winning bid, thus indicating that the limiting case of these auctions correspond to price taking as in neoclassical models of consumer behavior. However, when the uniform price paid is tied to the highest losing bid, price taking behavior does not ensue and ex post inefficient allocations ares possible. The impact of our results on analysis of k-double auctions with multi-unit bidders demands is also discussed.multi-unit auction, asymptotic equilibrium, efficiency

Reducing Healthcare Costs Requires Good Market Design

Healthcare costs are no doubt too high, and Congress has been pushing for 13 years to harness market forces in Medicare procurement. But despite all this time, we are on the precipice of adopting a very poor market design, according to Peter Cramton of University of Maryland and Brett Katzman of Kennesaw State University

Comment on Hoerger: Early Pilots of Medicare Auctions Brings No Solace to Auction Experts

Peter Cramton and Brett Katzman stick to their guns: Medicare auctions remain fatally flawed and must be fixed. They argue that contrary to Hoerger\u27s comment, no comfort can be drawn from the fact that the market was able to withstand price reductions in early pilots

The Consequences of Information Revealed in Auctions

This paper considers the ramifications of post-auction competition on bidding behavior under different bid announcement policies. In equilibrium, the auctioneer’s announcement policy has two distinct effects. First, announcement entices players to signal information to their post-auction competitors through their bids. Second, announcement can lead to greater bidder participation in certain instances while limiting participation in others. Specifically, the participation effect works against the signalling effect, thus reducing the impact of signalling found in other papers. Revenue, efficiency, and surplus implications of various announcement policies are examined

Asymptotic Properties of Equilibrium in Discriminatory and Uniform Price IPV Multi-Unit Auctions

This paper confronts the tractability problems that accompany IPV auction models with multi-unit bidder demands. Utilizing a first order approach, the asymptotic properties of symmetric equilibria in discriminatory and uniform price auctions are derived. It is shown that as the number of bidders increases, equilibrium bids converge to valuations in both discriminatory auctions and uniform price auctions where the price paid is determined by the lowest winning bid, thus indicating that the limiting case of these auctions correspond to price taking as in neoclassical models of consumer behavior. However, when the uniform price paid is tied to the highest losing bid, price taking behavior does not ensue and ex post inefficient allocations ares possible. The impact of our results on analysis of k-double auctions with multiunit bidders demands is also discussed

Reducing Healthcare Costs Requires Good Market Design

Healthcare costs are no doubt too high, and Congress has been pushing for 13 years to harness market forces in Medicare procurement. But despite all this time, we are on the precipice of adopting a very poor market design according to Peter Cramton of University of Maryland and Brett Katzman of Kennewaw State University.

Comment on Hoerger: Early Pilots of Medicare Auctions Bring No Solace to Auction Experts

Peter Cramton and Brett Katzman stick to their guns: Medicare auctions remain fatally flawed and must be fixed. They argue that contrary to Hoerger's comment, no comfort can be drawn from the fact that the market was able to withstand price reductions in early pilots.

Designed to fail : the medicare auction for durable medical equipment

Online Early publication May 28, 2014We examine the theoretical properties of the auction for Medicare Durable Medical Equipment. Two unique features of the Medicare auction are (1) winners are paid the median winning bid and (2) bids are nonbinding. We show that median pricing results in allocation inefficiencies as some high-cost firms potentially displace low-cost firms as winners. Further, the auction may leave demand unfulfilled as some winners refuse to supply because the price is set below their cost. We also introduce a model of nonbinding bids that establishes the rationality of a lowball bid strategy employed by many bidders in the actual Medicare auctions and recently replicated in Caltech experiments. We contrast the median-price auction with the standard clearing-price auction where each firm bids true costs as a dominant strategy, resulting in competitive equilibrium prices and full efficiency

Decision Analysis and the Principal-Agent Problem

The article discusses the classroom lecture that improves the traditional instruction in decision analysis by relating decision making under risk to the principal-agent problem. The baseline decision scenario is examined both from the perspective of a firm desiring to maximize the expected profit and from the perspective of a risk-averse manager desiring to maximize the expected utility. The article also provides students\u27 assessments regarding the effectiveness of the lecture

Designed to fail : the medicare auction for durable medical equipment

Online Early publication May 28, 2014We examine the theoretical properties of the auction for Medicare Durable Medical Equipment. Two unique features of the Medicare auction are (1) winners are paid the median winning bid and (2) bids are nonbinding. We show that median pricing results in allocation inefficiencies as some high-cost firms potentially displace low-cost firms as winners. Further, the auction may leave demand unfulfilled as some winners refuse to supply because the price is set below their cost. We also introduce a model of nonbinding bids that establishes the rationality of a lowball bid strategy employed by many bidders in the actual Medicare auctions and recently replicated in Caltech experiments. We contrast the median-price auction with the standard clearing-price auction where each firm bids true costs as a dominant strategy, resulting in competitive equilibrium prices and full efficiency