Date: 2011
Type: Working Paper
Revenue comparison in asymmetric auctions with discrete valuations
Working Paper, EUI ECO, 2011/27
DONI, Nicola, MENICUCCI, Domenico, Revenue comparison in asymmetric auctions with discrete valuations, EUI ECO, 2011/27 - https://hdl.handle.net/1814/18355
Retrieved from Cadmus, EUI Research Repository
We consider an asymmetric auction setting with two bidders such that the valuation of each bidder has a binary support. We prove that in this context the second price auction yields a higher expected revenue than the first price auction for a broad set of parameter values, although the opposite result is common in the literature on asymmetric auctions. For instance, the second price auction is superior both when a bidder’s valuation is more uncertain that the valuation of the other bidder, and in case of a not too large distribution shift or rescaling. In addition, we show that in some cases the revenue in the first price auction decreases when all the valuations increase [in doing so, we correct a claim in Maskin and Riley (1985)], and we derive the bidders’ preferences between the two auctions.
Cadmus permanent link: https://hdl.handle.net/1814/18355
ISSN: 1725-6704
Series/Number: EUI ECO; 2011/27
Publisher: European University Institute