Author(s): Yeon-Koo Che | Ian Gale
Journal: Theoretical Economics
ISSN 1555-7561
Volume: 1;
Issue: 1;
Start page: 95;
Date: 2006;
Original page
Keywords: Auctions | multidimensional types and atoms | risk aversion | Gateaux differentiable preferences | C70 | D44
ABSTRACT
This paper develops a methodology for characterizing expected revenue from auctions when bidders' types come from an arbitrary distribution. In particular, types may be multidimensional, and there may be mass points in the distribution. One application extends existing revenue equivalence results. Another application shows that first-price auctions yield higher expected revenue than second-price auctions when bidders are risk averse and face financial constraints. This revenue ranking extends to risk-averse bidders with general forms of non-expected utility preferences.
Journal: Theoretical Economics
ISSN 1555-7561
Volume: 1;
Issue: 1;
Start page: 95;
Date: 2006;
Original page
Keywords: Auctions | multidimensional types and atoms | risk aversion | Gateaux differentiable preferences | C70 | D44
ABSTRACT
This paper develops a methodology for characterizing expected revenue from auctions when bidders' types come from an arbitrary distribution. In particular, types may be multidimensional, and there may be mass points in the distribution. One application extends existing revenue equivalence results. Another application shows that first-price auctions yield higher expected revenue than second-price auctions when bidders are risk averse and face financial constraints. This revenue ranking extends to risk-averse bidders with general forms of non-expected utility preferences.
