the effect of income on child development this study presents estimates of the effect of parental income on children s cognitive social and emotional development the effect of current income is small especially when income is treated as endogenous the effect of permanent income is substantially larger but relatively small when compared to the magnitude of recent policy induced changes in income family background characteristics play a more important role than income in determining child outcomes policies that affect family income will have little direct impact on child development unless they result in very large and permanent changes in income

partnerships lemons and efficient trade we analyze the possibility of efficient trade with informationally interdependent valuations and with a dispersed ownership a crucial role is played by the sign of the derivatives that measure how valuation functions depend on others signals if valuations are increasing functions of other agents signals it is more difficult to achieve efficient trade with interdependent values than with private values where the respective derivatives are zero in contrast if valuations are decreasing functions of other agents signals it is easier to achieve efficient trade with interdependent values our results unify and generalize the insights of cramton et al 1987 myerson and satterthwaite 1983 and akerlof 1970

the wait and see option in ascending price auctions ascending auctions offer agents the option to wait and see before deciding to drop out we show that in contexts where as time proceeds agents get finer and finer estimates of their valuations incentives to drop out at one s expected valuation are weak it is optimal for agents to wait and see we first illustrate the claim in a private value setting we next analyze an interdependent value setting in which this wait and see option results in an imperfect information aggregation we also analyze the implications for the seller s revenue and show that the ascending format may dominate the second price format independently of the date at which the second price auction is run jel d44 d83

a liquidity based model of security design we consider the problem of the design and sale of a security backed by specified assets given access to higher return investments the issuer has an incentive to raise capital by securitizing part of these assets at the time the security is issued the issuer s or underwriter s private information regarding the payoff of the security may cause illiquidity in the form of a downward sloping demand curve for the security the severity of this illiquidity depends upon the sensitivity of the value of the issued security to the issuer s private information thus the security design problem involves a tradeoff between the retention cost of holding cash flows not included in the security design and the liquidity cost of including the cash flows and making the security design more sensitive to the issuer s private information we characterize the optimal security design in several cases we also demonstrate circumstances under which standard debt is optimal and show that the riskiness of the debt is increasing in the issuer s retention costs for assets

parental earnings and children s well being an analysis of the survey of income and program participation matched to social security administration earnings data i introduction in the aftermath of the great recession approximately one in five children in the united states lives in poverty making children the poorest age group in the united states children s defense fund 2010 land 2010 comprehensive measures of child well being have also begun to decline after showing steady improvement for most of the past 20 years given this backdrop efforts to improve the material conditions of children are likely to remain a salient issue for policymakers for many years an obvious target for policymakers is to improve the economic situation of parents indeed a vast literature in the social sciences has studied the association between parental income and children s outcomes to establish the importance of parental economic resources on children s well being one limitation of many of these studies is the lack of availability of parental income or earnings histories over long periods of time it is well established that the bias in using single year measures of parental income to proxy for long run income can be sizable and can vary by parental age solon 1992 mazumder 2005 haider and solon 2006 indeed a number of studies have shown that the estimated associations between parental income and child well being grow larger as parent income is measured over progressively longer time periods miller and korenman 1994 blau 1999 we further extend these findings using a unique dataset that includes a rich set of measures of child well being that is also linked to administrative data containing long term parental earnings histories for much larger samples of families than has typically been available specifically our dataset pools families from the 1984 1990 1993 1996 2001 and 2004 panels of the survey of income and program participation sipp each of these sipp samples were matched to earnings histories contained in social security administration ssa records we use the administrative data to construct long term time averages of parents earnings we use these time averages of parent earnings to estimate the association between parent earnings and childhood well being we use sipp topical modules on children s well being functional limitations and disability health status and utilization of health care and extended measures of well being to obtain a broad set of measures related to childhood health and well being we find that across virtually all of our indicators of childhood well being longer time averages lead to substantially larger estimates in some cases the associations more than double compared to using a single year of earnings in certain instances the estimates are only statistically significant when using the longer time averages among our substantive findings we show that a doubling of a 7 year average of earnings is associated with a 48 drop in the mean probability of a teenager reporting poor health a 39 drop in the mean probability of repeating a grade an 18 drop in the mean probability of being suspended a 75 percentage point drop in the mean probability of having insufficient food and a 6 percentage point increase in the mean number of times a child saw a doctor notably these estimates are 25 120 larger than those based on using a single year of earnings relative to the earlier studies that have shown similar patterns we use much larger samples and do not rely on self reported earnings we also exploit the very long earnings histories available in the ssa data to examine how the timing of parent earnings received during particular periods of the child s life is associated with adolescent health status the likelihood of enrolling in college and adult earnings we find suggestive evidence that for college enrollment and adult earnings parental earnings received during the school going years have a stronger association than earnings received earlier or later in the child s life we think that this is an important area for future research to further explore

on the existence of monotone pure strategy perfect bayesian equilibrium in games with complementarities abstract many important economic situations such as auctions and signaling games can be modeled as dynamic games of incomplete information with strategic complementarities of actions and types in this paper we extend the results of athey 2001 and reny 2011 from static bayesian games to dynamic environments with observable actions providing conditions that guarantee the existence of monotone equilibria in types in such games a feature that distinguishes this environment from those of previous results is the endogeneity of beliefs which can complicate continuity of payoffs needed to find a fixed point to address this we perturb the strategies of the game which pins down beliefs while preserving continuity of payoffs we then provide conditions which guarantee that there will exist monotone best replies to monotone strategies of one s opponents in a dynamic environment enabling verification of existence by merely looking at the primitives of the model

existence of equilibrium in single and double private value auctions we show existence of equilibria in distributional strategies for a wide class of private value auctions including the first general existence result for double auctions the set of equilibria is invariant to the tie breaking rule the model incorporates multiple unit demands all standard pricing rules reserve prices entry costs and stochastic demand and supply valuations can be correlated and asymmetrically distributed for double auctions we show further that at least one equilibrium involves a positive volume of trade the existence proof establishes new connections among existence techniques for discontinuous bayesian games

auction design for the efficient allocation of service capacity under congestion we consider the problem of efficiently allocating the capacity of a number of service facilities prone to congestion to a set of users with private information regarding their willingness to pay for different combinations of throughput versus latency auction mechanisms can be used to schedule the service capacity of available facilities however the interdependency of users valuations implies that simple uniform price adjustment processes e g tatonnement either fail to effectively clear or are subject to strategic manipulation in this paper we propose an iterative auction design and show that i it is efficient i e the auction closes with the allocation of service that maximizes the social welfare and ii it is strategy proof that is it is a dominant strategy for users to truthfully reveal their demand for service capacity throughout the auction

goodwill can hurt a theoretical and experimental investigation of return policies in auctions abstract will generous return policies in auctions benefit bidders we investigate this issue using second price common value auctions theoretically we find that the symmetric bidding equilibrium is unique unless returns are free and when returns are free there exist multiple equilibria with different implications for sellers moreover more generous return policies mitigate the winner s curse but also push the bids higher thus hurting bidders by eroding their surplus in the experiment bids increase and bidders earnings decrease with more generous return policies as predicted with free returns many bidders bid above the highest possible value subsequently returning the item regardless of value though consistent with equilibrium behavior this is not optimal for sellers

on minimal ascending auctions with payment discounts the literature on ascending combinatorial auctions yields conflicting insights regarding the possibility to implement the vickrey payoffs for general valuations we introduce the class of minimal ascending auctions a class which allows one to disconnect the final payments from the final bids but which prohibits the raising of the price vector of a provisionally winning bidder we first establish the impossibility of implementing the vickrey payoffs for general valuations second we propose a minimal ascending auction that yields a bidder optimal competitive equilibrium thanks to payment discounts

belief based refinements in signalling games abstract there are many economic problems which when modelled as games of incomplete information give rise to many sequential equilibria severely limiting the usefulness of the model there has recently been a large literature devoted to refining the set of equilibria in order to reduce this multiplicity by restricting the set of admissible disequilibrium beliefs this paper argues that the logical foundations of some refinements and the equilibria they focus on are problematic and further proposes an alternative refinement that avoids the difficulties we also provide an existence theorem covering a broad class of signalling games often studied in economics journal of economic literature classification numbers c72 c70 d82

collusion and signaling in auctions with interdependent values abstract the standard approach to collusion in auctions posits an uninformed disinterested third party who prior to the auction designs and implements a collusive mechanism in environments where collusion agreements are likely to be both proposed and executed by the involved parties this approach may neglect information leakages from simply a proposal to collude we consider a model of collusion where one informed bidder proposes to another as in es and schummer 2004 we allow for general interdependent values and affiliated signals in contrast to third party modeling approaches collusion is inefficient from both a social perspective except for the case of pure common values and from the perspective of the ring both bidders are better off than without colluding but the surplus extracted from the seller is distributed asymmetrically between the bidders the potential for information leakage from proposing is bad for low types who reveal that they are weak competitors but is advantageous for high types because they are able to signal their strength we identify a so called briber s curse whereby acceptance of a proposal causes the proposer to downgrade her expected value for the object when there is additional competition in the form of bidders outside of the cartel the briber s curse significantly harms cartel profits and raises seller revenues

foundations of dominant strategy mechanisms wilson 1987 criticizes applied game theory s reliance on common knowledge as sumptions in reaction to wilson s critique the recent literature of mechanism design has adopted the goal of finding detail free mechanisms in order to eliminate this re liance in practice this has meant restricting attention to simple mechanisms such as dominant strategy mechanisms however there has been little theoretical foundation for this approach in particular it is not clear the search for an optimal mechanism that does not rely on common knowledge assumption would lead to simpler mechanisms rather than more complicated ones this paper tries to fill the void in the context of an expected revenue maximizing auctioneer we investigate some foundations for using simple dominant strategy auctions

english auctions and the stolper samuelson theorem we prove that the english auction with bidders that need not be ex ante identical and may have interdependent valuations has an efficient ex post equilibrium we establish this result for environments where it has not been previously obtained we also prove two versions of the stolper samuelson theorem one for economies with n goods and n factors and one for non square economies similar assumptions and methods underlie these seemingly unrelated results

herding and the winner s curse in markets with sequential bids abstract we present a model of social learning in an environment with common values where informational cascades and herding arise in combination with the winner s curse a seller of an object sequentially obtains bids from potential buyers we characterize three classes of equilibria that differ widely in their information aggregation properties and in the size of the rent the seller captures from the buyers we compare the procedure of sequentially soliciting bids from the buyers to conducting an english auction for the object in terms of maximization of seller s revenue and demonstrate the superiority of the former journal of economic literature classification numbers d82 d83

how risk sharing may enhance efficiency of english auctions we investigate the possibility of enhancing efficiency by awarding premiums to a set of highest bidders in an english auction in a setting that extends maskin and riley 1984 econometrica 52 1473 1518 in three aspects i the seller can be risk averse ii the bidders can have heterogeneous risk preferences and iii the auction can have a binding reserve price our analysis reveals that the premium has an intricate joint effect on risk sharing and expected revenue which in general benefits risk averse bidders when the seller is more risk averse than the pivotal bidder a condition often verifiable by deduction prior to the auction the premium also benefis the seller and therefore leads to a pareto improvement of the english auction the advantage of such premium tactics is directly related to a the seller s degree of risk aversion b the reserve price c the riskiness of the object for sale d the degree of heterogeneity in risk preferences among the bidders and e the number of the potential bidders

the shill bidding effect versus the linkage principle abstract the analysis of second price auctions with externalities is utterly modified if the seller is unable to commit not to participate in the mechanism for the general symmetric model introduced by milgrom and weber p milgrom r weber a theory of auctions and competitive bidding econometrica 50 1982 1089 1122 we characterize the full set of separating equilibria that are symmetric among buyers and with a strategic seller being able to bid in the same way as any buyer through a so called shill bidding activity the revenue ranking between first and second price auctions is different from the one arising in milgrom and weber the benefits from the highlighted linkage principle are counterbalanced by the shill bidding effect

independent private value auctions bidder behaviour in first second and third price auctions with varying numbers of bidders the symmetric equilibrium of third price auctions is characterized it makes a number of contrasting predictions relative to firms and second price auctions bids exceed private values the marginal effects on bids of an increase in private values is greater than one increasing numbers of bidders reduces bids and risk aversion requires bidding below the risk neutral nash equilibrium in the experiment bidders do not always satisfy the point predictions of the theory however the game theoretic models correctly anticipate at least directionally the important effects of the price rule changes copyright 1993 by royal economic society

incentive compatibility and differentiability new results and classic applications this note provides several generalizations of mailath s 1987 result that incentive compatibility plus separation implies differentiability the new results extend the theory to classic models in finance such as leland and pyle 1977 glosten 1989 and demarzo and duffie 1999 that were not previously covered

optimal bidding in auctions from a game theory perspective abstract the game theoretic perspective in auction bidding has provided a powerful normative framework for the analysis of auctions and it has generated an impressive volume of research contributions tracing this research we review key recent advances which have greatly expanded our understanding of the operation of auctions and produced a more accurate analysis of mechanism design and optimal bidding we follow various experimental studies which have shown that the predictive power of auction theory remains in many cases limited for this reason we concentrate on research themes which enhance the applicability of auction theory leading to more realistic descriptions of bidding behaviors we identify important innovations which expand the environment of auction bidding and carry us beyond rational decision making we conclude providing directions of future research and discussing their implications

english auctions with resale an experimental study i design and test a simple english auction and two english auctions with resale but with different informational backgrounds all three treatments theoretically have the same equilibrium i find however that the possibility of resale alters behavior significantly in the two treatments with resale subjects deviated from both the nash prediction and the common results about bidding behavior in english auctions subjects tend to overbid when they are certain they can reap the whole surplus in the resale market i employ different models like qre and levels of reasoning and conclude that overbidding can be explained as a rational response to the noisy environment in markets with human participants that is as rational decision making when anticipating others to make errors when the outcome of the resale market is not certain there is significant signaling behavior and auction prices tend to be lower than the nash prediction

economic status and health in childhood the origins of the gradient the well known positive association between health and income in adulthood has antecedents in childhood not only is children s health positively related to household income but the relationship between household income and children s health becomes more pronounced as children age part of the relationship can be explained by the arrival and impact of chronic conditions children from lower income households with chronic conditions have worse health than do those from higher income households the adverse health effects of lower income accumulate over children s lives part of the intergenerational transmission of socioeconomic status may work through the impact of parents income on children s health

optimality and robustness of the english auction abstract in milgrom and weber s 1982 econometrica 50 1089 1122 general symmetric model under a few additional regularity conditions the english auction maximizes the seller s expected profit within the class of all posterior implementable trading procedures and fails to do so among all interim incentive compatible procedures in which losers do not pay these results suggest that appropriate notions of robustness and simplicity which imply the optimality of the english auction for a risk neutral seller must impose bargaining like features on the set of feasible trading mechanisms journal of economic literature classification numbers d44 d82

interdependent value auctions with insider information theory and experiment abstract we develop a model of interdependent value auctions in which two types of bidders compete insiders who are perfectly informed about their value and outsiders who are informed only about the private component of their value because the bidding strategy of outsiders cannot efficiently adjust with that of insiders the second price auction is inefficient the english auction has an equilibrium in which the information outsiders infer from the history of drop out prices enables them to bid toward attaining efficiency the presence of insiders has positive impacts on the seller s revenue a laboratory experiment confirms key theoretical predictions despite evidence of naive bidding

why do sellers usually prefer auctions we compare the most common methods for selling a company or other asset when participation is costly a simple simultaneous auction and a sequential process in which potential buyers decide in turn whether to enter the bidding the sequential process is always more efficient but preemptive bids transfer surplus from the seller to buyers because the auction is more conducive to entry precisely because of its inefficiency it usually generates higher expected revenue we also discuss the effects of lock ups matching rights break up fees as in takeover battles entry subsidies etc

auctions with toeholds an experimental study of company takeovers we run experiments on english auctions where the bidders already own a part toehold of the good for sale the theory predicts a very strong explosive effect of even small toeholds while asymmetric toeholds do have an effect on bids and revenues in the lab which gets stronger the larger the asymmetry it is not nearly as strong as predicted we explain this by analyzing the flatness of the payoff functions which leads to large deviations from the equilibrium strategies being relatively costless this is a general fundamental weakness of this type of explosive equilibria which makes them fail when human players are involved our analysis shows that a levels of reasoning model explains the results better where this equilibrium fails moreover we find that although big toeholds can be effective in a takeover battle the cost to acquire them might be higher than the strategic benefit they bring

auctions in which losers set the price we study auctions of a single asset among symmetric bidders with affiliated values we show that the second price auction minimizes revenue among all efficient auction mechanisms in which only the winner pays and the price only depends on the losers bids in particular we show that the k th price auction generates higher revenue than the second price auction for all k 2 if rationing is allowed with shares of the asset rationed among the t highest bidders then the t 1 st price auction yields the lowest revenue among all auctions with rationing in which only the winners pay and the unit price only depends on the losers bids finally we compute bidding functions and revenue of the k th price auction with and without rationing for an illustrative example much used in the experimental literature to study first price second price and english auctions

5 information impact and allocation rules in auctions with affiliated private values a laboratory study in affiliated private value auctions each bidder has perfect information regarding his her own value for the object at auction but higher values of the item for one bidder make higher values for other bidders more likely we report on a series of experiments examining three key implications of these auctions i in a first price auction public information about rivals values increases expected revenue ii an english auction increases expected revenue compared to a first price auction and iii a second price auction is isomorphic to an english auction in examining these issues we compare predictions of some ad hoc bidding models with nash equilibrium predictions in the first price auction experiments nash equilibrium bidding theory organizes the data better than either of two ad hoc bidding models public information about others valuations does increase average revenue but the increase in revenue is smaller and less reliable than predicted under risk neutral nash equilibrium bidding lower average revenue might be attributed to risk aversion while the high variability is attributed to a sizable frequency of individual bidding errors relative to the theory bidding theory precisely organizes english auction outcomes after a brief initial learning period the dominant strategy equilibrium does not organize second price auctions nearly as well as market prices persistently exceed predicted prices the difference between english and second price outcomes is attributed to effects of different information flows inherent in the structure of the two institutions on eliminating bidding errors revenue impacts of these two institutions relative to a first price auction are examined in light of observed bidding patterns

intergenerational income mobility in the united states social scientists and policy analysts have long expressed concern about the extent of intergenerational income mobility in the united states but remarkably little empirical evidence is available the few existing estimates of the intergenerational correlation in income have been biased downward by measurement error unrepresentative samples or both new estimates based on intergenerational data from the panel study of income dynamics imply that the intergenerational correlation in long run income is at least 0 4 indicating dramatically less mobility than suggested by earlier research copyright 1992 by american economic association

asymmetric english auctions abstract this paper studies equilibria of the n bidder single object english or open ascending price auction in a setting with interdependent values and asymmetric bidders maskin in h siebert ed privatization institut fur weltwirtschaften der universitat kiel kiel 1992 pp 115 136 showed that if the values satisfy a single crossing condition then the two bidder english auction has an efficient equilibrium in this paper two extensions of the single crossing condition the average crossing condition and the cyclical crossing condition are introduced the main result is that under either of these conditions the n bidder english auction has an efficient equilibrium

optimal bidding in auctions of mixed populations of bidders abstract a mixed population of bidders consists of two asymmetric groups members of the first group are game theoretic players who maximize their expected profit and incorrectly believe that their opponents act similarly the second group of bidders adopts an irrational strategy they either choose their bids randomly following a given probability distribution in a naive form of bidding or follow a decision theoretic approach maximizing their expected profit under the assumption that all other bids are random in a sealed bid private value procurement auction we examine the optimal strategy of a new player who has perfect knowledge of the structure of the mixed bidder population and enters the auction the optimal bid of the new bidder is derived when the cost and mark up follow a uniform distribution in 0 1 the effect of the relative size of the group of game theoretic bidders and the population size on the optimal bid price is established

incentive compatibility in signaling games with a continuum of types on donne deux resultats utiles pour demontrer l existence et pour caracteriser des equilibres de separation dans des jeux de signalement

fortunate sons new estimates of intergenerational mobility in the united states using social security earnings data previous studies relying on short term averages of fathers earnings have estimated the intergenerational elasticity ige in earnings to be approximately 0 4 due to persistent transitory fluctuations these estimates have been biased down by approximately 30 or more using administrative data containing the earnings histories of parents and children the ige is estimated to be around 0 6 this suggests that the united states is substantially less mobile than previous research indicated estimates of intergenerational mobility are significantly lower for families with little or no wealth offering empirical support for theoretical models that predict differences due to borrowing constraints

upping the ante how to design efficient auctions with entry of primary importance in auction design is the set of strategies available to the seller at the auction stage we first formalize hold up regarding entry costs that preys on second price auctions when the seller may engage in a costly shill bidding activity we derive the optimal reserve and show how shill bidding can make posted prices outperforming auctions second we advocate for a new regulation where shills would be banned but with the possibility of canceling sales ex post which offers some valuable flexibility the english auction with jump bids implements then the first best in general environments

designing incentive systems for truthful forecast information sharing within a firm we consider a firm where the sales division sales is responsible for demand forecasting and the operations division operations is responsible for ordering sales has better information about the demand than operations and sends a nonbinding demand forecast to operations to incentivize truthful information sharing we include a forecast error penalty in the incentive system of sales besides monetary payoffs we also add behavioral factors to the utility function of sales we model the setting as a signaling game and derive the pareto dominant separating equilibria of the game in laboratory experiments we observe human behavior that is in line with the predictions of the behavioral model but deviates substantially from expected payoff maximizing behavior we use the behavioral model to design incentive systems for truthful information sharing and validate the approach in an experiment with out of sample treatments and out of sample subjects we conduct additional experiments to provide further robus

an efficient ascending bid auction for multiple objects when bidders exhibit multi unit demands standard auction methods generally yield inefficient outcomes this article proposes a new ascending bid auction for homogeneous goods such as treasury bills or telecommunications spectrum the auctioneer announces a price and bidders respond with quantities items are awarded at the current price whenever they are clinched and the price is incremented until the market clears with private values this dynamic auction yields the same outcome as the sealed bid vickrey auction but has advantages of simplicity and privacy preservation with interdependent values this auction may retain efficiency whereas the vickrey auction suffers from a generalized winner s curse

bidding in a possibly common value auction abstract we analyze a second price auction with two bidders in which only one of the bidders is informed as to whether the object is valued commonly we show that any equilibrium strategy of the bidder who is uninformed must be part of an equilibrium when both bidders instead know that the auction is not common value regardless of the way in which the values are different we derive sufficient conditions for equilibrium existence

a model of dynamic limit pricing with an application to the airline industry we develop a dynamic limit pricing model where an incumbent repeatedly signals information relevant to a potential entrant s expected profitability the model is tractable with a unique equilibriu

bad news can be good news early dropouts in an english auction with multi dimensional signals abstract in an english auction with multi dimensional signals a reversal may arise an earlier dropout may be better news to the seller than a later dropout and the expected revenue can be decreasing over some range of clock prices

correlated information and mechanism design in models of asymmetric information possession of private information leads to rents for the possessors this induces mechanism designers to distort away from efficiency the authors show that this is an artifact of the presumption that information is independently distributed rent extraction in a large class of mechanism design games is analyzed and a necessary and sufficient condition for arbitrarily small rents to private information is provided additionally the two person bargaining game is shown to have an efficient solution under first order stochastic dominance and a hazard rate condition similar conditions allow full rent extraction in milgrom weber auctions

ex post information in auctions assumptions maskin and riley 1984 show that when the amount a buyer is willing to pay for the auctioned object is not independent of his wealth expected revenue tends to be lower under open bidding in contrast milgrom and weber 1982 relax the assumption that valuations are independent and assume instead that buyers private estimates of the item s value are affiliated a buyer with a high estimate then tends to believe that other buyers will have higher estimates as well maintaining the other assumptions milgrom and weber show that expected revenue is higher in the open ascending bid auction the intuition behind this result is that in sealed high bid auctions a buyer s bid is determined not only by his own beliefs but via their bids by the beliefs of those with lower estimates a buyer with a low estimate believes that others are more likely to have low estimates as well he therefore bids less aggressively it follows that a buyer can beat all opponents who have lower estimates with a bid which is lower than it would be if beliefs were independent 2 milgrom and weber also show that if the seller purchases and then publicly reveals information which is positively linked to buyers valuations this also raises expected gross revenue from an auction the intuition here is that this helps to reduce the difference in bidders willingness to pay 3 that such a reduction should raise expected revenue is easily understood for the limiting case in which the seller s information includes all the buyers private information for then all buyer asymmetry is eliminated and so expected buyer profit is bid away to zero the seller therefore reaps the entire surplus in the following pages the implications of correlated signals are further explored while milgrom and weber emphasized the potential gains to a seller who reveals information ex ante the focus here is on ex post information in section 2 it is shown that under weak assumptions the sealed high bid auction is dominated by any auction

optimal pricing mechanisms with unknown demand the standard profit maximizing multi unit auction intersects the submitted demand curve with a preset reservation supply curve which is determined using the distribution from which the buyers valuations are drawn however when this distribution is unknown a preset supply curve cannot maximize monopoly profits the optimal pricing mechanism in this situation sets a price to each buyer on the basis of the demand distribution inferred statistically from other buyers bids the resulting profit converges to the optimal monopoly profit with known demand as the number of buyers goes to infinity and convergence can be substantially faster than with sequential price experimentation

asymmetric information and adverse selection in mauritian slave auctions information asymmetry is a necessary prerequisite for testing adverse selection this paper applies this sequence of tests to mauritian slave auctions the theory of dynamic auctions with private and common values suggests that when an informed participant is known to be active uninformed bidders will be more aggressive and the selling price will be higher we conjecture that observable family links between buyer and seller entailed superior information and find a strong price premium when a related buyer purchased a slave indicative of information asymmetry we then test for adverse selection using sale motivation our results indicate large discounts on voluntary as compared to involuntary sales consistent with adverse selection the market anticipated that predominantly low productivity slaves would be brought to the market in voluntary sales copyright 2009 wiley blackwell

6 revenue effects and information processing in english common value auctions an experiment analyzing behavior in english common value auctions is reported english auctions raise more revenue than first price auctions only when bidders do not suffer from a strong winner s curse agents employ other bidders dropout prices along with their private information as nash bidding theory predicts however a simple and natural signal averaging rule which does not require recognizing the adverse selection effect of winning the auction better characterizes the data than the nash rule monte carlo simulations using fiml estimates of the signal averaging rule predict a number of data characteristics not directly employed in the estimation procedure copyright 1996 by american economic association

an experimental analysis of auctions with interdependent valuations abstract we study experiments in an auction setting with interdependent valuation groups of three players receive private signals and then bid for a single indivisible item valuations for the item differ within groups and depend asymmetrically on a bidder s own and other bidders signals theoretically the english auction yields efficient allocations while other standard auction formats fail to do so consistent with equilibrium predictions we find that an english auction yields significantly more efficiency than a second price sealed bid auction we also study the seller s expected revenue and the bidders expected profits and find that the experimental results are close to the theoretical predictions

equilibria in open common value auctions abstract a sufficient condition for uniqueness of nash equilibrium in second price common value auctions is identified we establish that there exists a continuum of equilibria in irrevocable exit common value auctions for the case of two bidders we provide plausible sufficient conditions under which the expected seller revenue is maximized at the symmetric equilibrium an example in which the auctioneer s revenue at the symmetric equilibrium in a second price auction is strictly greater than the revenue at many asymmetric equilibria in the corresponding irrevocable exit auction is provided

correlated information mechanism design and informational rents abstract cremer and mclean econometrica 56 1988 1247 1258 obtain a sufficient and necessary condition for full surplus extraction in bayesian nash equilibrium the rank condition which mcafee and reny econometrica 60 2 1992 395 421 later generalize for continuous type spaces this paper shows that if the principal does not know how noisy is the agent s signal or equivalently when signals available to an agent can be ranked by blackwell s informativeness and an agent s informativeness is independent of others information the rank condition fails to hold conversely when rank condition fails and informational rents are left to an agent the model can be interpreted as if the principal were uncertain about the informativeness of the agent s signal

when should sellers use auctions the simultaneous bid auction is a standard method for sellers to solicit offers from buyers a simple alternative is for a seller to ask buyers to make offers sequentially if it is costly for buyers to participate the sequential mechanism will tend to be more efficient than the simultaneous auction because later potential buyers can condition their participation decisions on earlier bids however the sequential mechanism s greater efficiency may not produce higher revenues because while the possibility of deterring later potential entrants can lead early bidders to bid aggressively the fact that later firms might be deterred will tend to reduce revenues the relative revenue performance of the mechanisms will therefore depend on whether the threat of potential future competition which can raise bids in the sequential mechanism is more valuable to the seller than actual competition which will tend to be greater in the simultaneous auction the relative revenue performance of these alternative mechanisms has direct implications for how assets should be sold in the case of how to structure the sale of corporations this question has attracted attention from practitioners and commentators since the delaware supreme court s 1986 revlon decision charged a board overseeing the sale of a company with the duty of getting the best price for the stockholders revlon v mcandrews and forbes holdings 1986 in practice

first price auctions in the asymmetric n bidder case i consider the first price auction when the bidders valuations may be differently distributed i show that every bayesian equilibrium is an essentially pure equilibrium formed by bid functions whose inverses are solutions of a system of differential equations with boundary conditions i then prove the existence of an equilibrium i prove its uniqueness when the valuation distributions have a mass point at the lower extremity of the support i give sufficient conditions for uniqueness when every valuation distribution is one of two atomless distributions i establish inequalities between equilibrium strategies when relations of stochastic dominance exist between valuation distributions

efficiency in auctions theory and practice updated copies of this paper can be found at abstract in many contexts efficiency is an important consideration in structuring auctions in this paper we survey several sources of inefficiency arising in auctions we first highlight how demand reducing incentives both in theory and in practice affect the efficiency of multi unit auctions next we study inefficiencies arising from interdependence in bidder valuations again we highlight both theoretical insights as well as how these translate in practice finally we present an impossibility theorem for attaining efficiency in sufficiently rich auction contexts an auction form suggested by klemperer is discussed as a means of ameliorating inefficiencies arising in practice

full extraction of the surplus in bayesian and dominant strategy auctions we consider auctions for a single indivisible object in the case where the bidders have information about each other which is not available to the seller we show that the seller can use this information to his own benefit and we completely characterize the environ ments in which a well chosen auction gives him the same expected payoff as that obtainable were he able to sell the object with full information about each bidder s willingness to pay we provide this characterization for auctions in which the bidders have dominant strate gies and for those where the relevant equilibrium concept is bayesian nash in both set ups the existence of these auctions hinges on the possibility of constructing lotteries with the correct properties we consider the situation in which an agent the seller possesses one indivisible unit of a good to which he attaches no value but the good has value to a number of potential buyers and its transfer to one of them would increase social welfare in particular the transfer to the buyer with the highest valuation maximizes social welfare in this paper we completely characterize environments in which the seller can design an auction that will enable him to capture for himself the full increase in social welfare induced by the transfer of the good to the bidder with the highest willingness to pay if the seller had full information about the reservation prices of potential buyers his optimal selling strategy would be very simple he would announce a price equal or very close to the highest reservation value the optimal strategy for the bidder with the highest evaluation would be to accept the offer note that we are treating a situation in which the seller can commit himself to a price as a result of the exchange the utility of the seller increases by the full amount of the increase in social welfare and he has been able to fully extract the surplus in many circumstances however a seller has only imperfect knowledge of the buyers willingnesses to pay in this case he must find some mechanism or auction which will enable him to maximize his benefit from the sale of the object the auction literature starts with this observation and shows how the seller can by an astute choice of auction extract the largest possible fraction of the surplus in general the literature has shown that this proportion is strictly less than one in some circumstances the bidders will have information about each other which is not available to the seller for instance in auctions for petroleum drilling rights bidders know the results of geological tests which they have

a walrasian theory of markets with adverse selection the paper describes a walrasian theory of markets with adverse selection and shows how refinements of equilibrium can be used to characterize uniquely the equilibrium outcome equilibrium exists under standard conditions it is shown that under certain conditions a stable set exists and is contained in a connected set of equilibria for generic models there exists a stable outcome that is all the equilibria in the stable set have the same outcome these ideas are applied to markets with one sided and two sided uncertainty under standard monotonicity conditions it is shown that the stable outcome is separating and implies a particular pattern of matches of buyers and sellers

an efficient multi unit ascending auction we provide an ascending auction that yields an e cient outcome when there are many identical units for sale and bidders have interdependent values and downward sloping demand our ascending auction both extends and generalizes ausubel s 1997 and yields the same outcome as perry and reny s 2000 generalization of vickrey s 1961 sealed bid auction there are two key components to our auction bidders are permitted both to

the ambiguity of earnings announcements we study the consequences of misreporting in settings where ambiguity averse investors face uncertainty about two aspects of the firm its productivity and the weakness of its reporting system we

an analysis of the war of attrition and the all pay auction we study the war of attrition and the all pay auction when players signals are affiliated and symmetrically distributed we a find sufficient conditions for the existence of symmetric monotonic equilibrium bidding strategies and b examine the performance of these auction forms in terms of the expected revenue accruing to the seller under our conditions the war of attrition raises greater expected revenue than all other known sealed bid auction forms journal of economic literature classification numbers d44 d82 1997 academic press

outside options another reason to choose the first price auction abstract in this paper we study equilibrium and experimental bidding behaviour in first price and second price auctions with outside options we find that bidders do respond to outside options and to variations of common knowledge about competitors outside options however overbidding in first price auctions is significantly higher with outside options than without first price auctions yield more revenue than second price auctions this revenue premium is significantly higher with outside options in second price auctions the introduction of outside options has only a small effect

on the efficiency of the first price auction we provide a natural setting in privatizations in which the equilibrium of the first price auction gives greater expected surplus than any equilibrium of the open ascending auction