slides_25_H.pdf - Overview AUCTIONS • Context You have an...

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AUCTIONS 1 Overview Context: You have an object to sell; what’s the best way to do it? Concepts: fixed-price, auction, negotiation Economic principle: auctions may be the best form of price discrimination by self-selection 2 Outline Types of selling mechanisms Types of auctions Auction design Bidding strategy: independent-values case Bidding strategy: common-values case 3 Outline Types of selling mechanisms Types of auctions Auction design Bidding strategy: independent-values case Bidding strategy: common-values case 4
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Alternative selling mechanisms Who sets the price or prices? - Firm: pricing - Buyer: auctions - Both: negotiations Pros and cons of auctions vis-a-vis pricing and negotiations. 5 Fixed price vs auctions Seller owns a widget, no value for it Two interested buyers; valuations either v = $100 or v = $150 (equal probability) Perfect correlation: buyers have same valuation Buyers know their valuation, seller does not Fixed price: set p = 100 for E ( π ) = 100 Ascending price auction: b = v , so E ( π ) = 125 Idea: auction as ultimate strategy for price discrimination by self-selection 6 Fixed price vs auctions More generally, auctions perform well when - supply is limited (one or a few objects) - information about demand (number, WTP) is limited Auction as a means for price discovery Also, a form of price discrimination 7 Outline Types of selling mechanisms Types of auctions Auction design Bidding strategy: independent-values case Bidding strategy: common-values case 8
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Types of auctions Auctions vary along multiple dimensions Method of submitting bids - Open outcry - sealed bid Determination of final price - first price, second price, all pay - reserve prices - highest price (reverse auction) Nature of buyer’s valuation - common value - private values 9 Types of auctions Some common type of auctions: - Ascending auction (a.k.a. English)
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  • Fall '15
  • ANDREWPAIZIS
  • Shell, Auction, Vickrey

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