3 Bidder Behavior - Auctions by Timothy P. Hubbard, Harry J. Paarsch - strategiadomiante teoremaequivalenzadelle aste tutteefficientitrannecheperilvenditore
The price on the clock rises continuously; as the price ascends, bidders no longer interested in the object lower their paddles. Eventually only two bidders remain active, but the price continues to ascend. When one of those bidders drops out, the clock stops.Read more at location 660
Economists also refer to this model of an English auction as the button auction model: bidders press down on a button as the prices ascends. A bidder releases the button once the price exceeds what he is willing to pay.Read more at location 662
English auction has a simple solution because each player has a weakly dominant strategy.Read more at location 666
Strict dominance for Alice meant that regardless of what Bob chose to do, Alice would be strictly better off if she confessed. Weak dominance is just like this, except that it allows for ties.Read more at location 668
Weakly dominant strategies are nice to have—if you’re the bidder, it’s hard to go wrong.Read more at location 671
What makes the bidding strategy at the English auction so simple to understand is that the increases in the asking price are observed by all bidders—theRead more at location 681
the winning bidder at a Vickrey auction pays the second-highest submitted bid.Read more at location 684
in the baseline model, it is again a weakly dominant strategy for bidders to tender bids that equal their valuations.Read more at location 686
To understand the bidding strategy, suppose that a bidder has a valuation of $41, and investigate the potential consequences of bidding something other than $41. First, consider bidding something less than $41, say, $35. If $35 is the highest bid submitted, then the auction is won and the second-highest submitted bid is paid. For example, suppose that the second-highest bid was $29. Then the difference between the valuation, $41, and the price paid, $29, yields a payoff of $12. Of course, this exact outcome would have obtained had a bid of $41 been tendered as well.Read more at location 689
suppose that the highest bid is, say, $82, in which case neither a bid of $35 nor one of $41 would have won the object; no harm no foul.Read more at location 694
In contrast, imagine the highest bid is something like $39. By submitting a bid of $35, the auction is lost, and the payoff is zero. Tendering $35 leaves our bidder regretting the decisionRead more at location 695
Next consider bidding something more than $41, say, $44. If $44 is not the highest tender submitted, then the bidder earns nothing—theRead more at location 699
if $44 is the highest bid, two things can happen: first, if the second-highest bid is $39, then the auction is won with a bid of $44 and also would have been won with a bid of $41; in both cases, a payoff of $2 is earned.Read more at location 701
If the second highest bid is $42, and the auction is won with a bid of $44, then the payoff involves a loss of $1.Read more at location 703
Since neither bidding less nor bidding more ever does better, a bidder cannot gain from bidding anything but the drawn valuation. Bidding the drawn valuation is a weakly dominant strategy.Read more at location 706
bidding high increases the odds that you win but decreases the payoff if you win; bidding low decreases the odds that you win but increases the payoff if you win. Clearly, a trade-off exists. At second-price auctions, however, your payoff should you win is unaffected by what you bid, so no such trade-off exists.Read more at location 716
Finally, an interdependence exists among the bidders—your chances of winning depend not only on your bid, but also on how your bid compares to all the other bids.Read more at location 727
all bidders are using the same rule to convert a drawn valuation into a bid, submitted bids will differ. Second, players with high valuations bid more than those with low valuations. Third, the bids are lower than drawn valuations: bidders shade their bids below their true valuations. In other words, they lie about what the object is worth to them.Read more at location 734
An important difference exists between what someone would like to do before the auction is held when information is incomplete, and what the same person would do after the auction concludes and the bids have been revealed.Read more at location 772
it is important that the rules of the auction be respected. Obviously, after discovering that he has lost the auction, Bob would like to approach the seller, to try to negotiate an agreementRead more at location 781
Sellers are bound by the policies they announce before bids are received; they cannot change the rules after having seen all of the bids.Read more at location 785
In the absence of a legal system, however, commitment can still play a powerful role, especially when reputation is important.Read more at location 786
Although the Dutch auction has an open format, the information revealed during the auction is not at all informative to bidders. The only time bidders learn anything from their rivals is when the auction is over: the only action a bidder can take is to stop the clock,Read more at location 793
the bidder is breathless with excitement because the longer the clock goes unstopped, the cheaper will be the object. As the price descends, however, the odds that a rival bidder will stop the clock increase.Read more at location 796
The problem faced by a bidder at a Dutch auction is then exactly the same problem as the one faced by a bidder deciding what tender to submit at a first-price, sealed-bid auction.Read more at location 798
Despite the fact that these two types of auctions are quite different, the Dutch and first-price, sealed-bid auctions are actually the same strategically. Economists refer to these auctions as strategically equivalent.Read more at location 802
Not only are the first-price, sealed-bid and Dutch auctions strategically equivalent, but within the baseline model English and Vickrey auctions are as well.Read more at location 804
two basic reasons: first, to allocate an object; second, to earn revenue.Read more at location 824
When it comes to allocating the object, we are interested in the notion of efficiency.Read more at location 825
did the participant who valued the object the most end up with the object at the conclusion of the auction?Read more at location 826
A second reason auctions are used is to generate revenue for the seller.Read more at location 830
can the seller expect any one of the four types of auctions considered thus far to yield revenues higher than the others? Initially surprising to many, the answer to this question is no.Read more at location 830
you might think that a second-price auction should do better because, as we have shown, bidders all tender higher bids in this environment.Read more at location 833
Of course, at a second-price auction, the seller receives the second-highest bid, not the highest bid. Revenue equivalence tells us that, once bidder behavior is internalized, these two factors balance each other out perfectly.Read more at location 835
This remarkable result, which is referred to as the revenue equivalence theorem, is perhaps the most famous result in all of auction theory.Read more at location 838
the relevant comparison is one based on average revenues—in expectation.Read more at location 848
Could the seller change the rules to garner even more revenue? In other words, are these four types of auctions optimal?Read more at location 858
Note: ESISTONO ASTE MIGLIORI? SÌ BASTA ASSUMERE ALTRE REGOLE
