AUCTIONS

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AUCTIONS

• VAMSEE KONERU
• PRADNYA SUTE

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OUTLINE

• INTRODUCTION
• AUCTION SETTINGS
• AUCTION PROTOCOLS
• ISSUES

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INTRODUCTION

• An auction is a deal between two agents an
  auctioneer and one of the bidders
• Auctioneer highest possible payment
• Bidder lowest possible price
• Auction theory Auction protocols and agent
  strategies
• Dominant strategy

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AUCTION SETTINGS

• Based on how an agents value of the item is
  formed
• Private value auctions
• Common value auctions
• Correlated value auctions

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AUCTION PROTOCOLS

• English auction
• First-price sealed-bid auction
• Dutch auction
• Vickrey auction

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1. ENGLISH AUCTIONS

• First-price, open-cry, ascending
• Strategy function of private value, others
  valuations and past bids
• Dominant strategy bid in small increments until
  private value is reached
• Winner pays price of his bid
• Open exit
• Real-time

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2. FIRST-PRICE SEALED-BID

• One shot
• Highest bidder wins at his price
• No relevant information is revealed
• No dominant strategy
• Best strategy bid less than true value
• Bidder uncertainty

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3. DUTCH AUCTIONS

• Open-cry descending
• Auctioneer starts at a high price and keeps
  lowering it until someone grabs the price
• No dominant strategy (like first-price
  sealed-bid)
• Efficient in real-time

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4. VICKREY AUCTIONS

• Second-price sealed bid
• One-shot
• Highest bidder wins at second highest price
• Dominant strategy bid at true value
• Encourages truthfulness
• Effort is not wasted in counterspeculation

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PROTOCOL EQUIVALENCE

• Strategic equivalence
• Same expected revenue
• Same bidding strategy
• English and Vickrey auctions
• First-price sealed-bid and Dutch auctions

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ISSUES

• Winners curse
• Efficiency of allocation
• Pareto efficiency
• English and Vickrey auctions - Most efficient

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• Revenue Equivalence

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• Bidder Collusion
• None of the four is collusion-proof
• First-price sealed-bid and Dutch auctions better
• Bidders need not identify each other to collude
  in English auctions, unlike in the others

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• Lying Auctioneer
• Problem in Vickrey auction overstated second
  bid electronic signatures
• Non-private value auctions English auction
  auctioneers shills
• Overstated reservation price in Vickrey auctions
  sometimes risky to the auctioneer

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• Computation
• Auctions of interrelated items
• Inefficient allocation and lying - lookahead
• Counterspeculation
• Uncertainty about valuation
• When to counterspeculate