Auction theory and a note on game mechanisms
This paper will review important topics on the subject of auction theory and mechanism design, these include: efficiency first and foremost, also revenue comparison between different types of auctions and the issue of incentive compatibility, individual rationality with the general idea and proof th...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Sciendo
2021-05-01
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| Series: | Croatian Review of Economic, Business and Social Statistics |
| Subjects: | |
| Online Access: | https://doi.org/10.2478/crebss-2021-0004 |
| _version_ | 1797331739289321472 |
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| author | Josheski Dushko Karamazova Elena |
| author_facet | Josheski Dushko Karamazova Elena |
| author_sort | Josheski Dushko |
| collection | DOAJ |
| description | This paper will review important topics on the subject of auction theory and mechanism design, these include: efficiency first and foremost, also revenue comparison between different types of auctions and the issue of incentive compatibility, individual rationality with the general idea and proof that bilateral trade is inefficient. Mechanism design theory tells us that if buyers and sellers both have private information full efficiency is impossible, however Vickrey auction (single unit auction) will be efficient i.e. will put the goods in the hands of the buyers that value them most. However, the conclusion from this paper is that because of overvaluation of bidders the main result is inefficient, i.e. bids are too high. When weak and strong bidders are compared the main conclusion is that strong bidders’ expected payoff is higher in second price auction (SPA), while weak bidder prefers first price auction (FPA) bid. |
| first_indexed | 2024-03-08T07:38:44Z |
| format | Article |
| id | doaj.art-0d5f9c01c84b42d997fea0441cf0de31 |
| institution | Directory Open Access Journal |
| issn | 2459-5616 |
| language | English |
| last_indexed | 2024-03-08T07:38:44Z |
| publishDate | 2021-05-01 |
| publisher | Sciendo |
| record_format | Article |
| series | Croatian Review of Economic, Business and Social Statistics |
| spelling | doaj.art-0d5f9c01c84b42d997fea0441cf0de312024-02-02T17:45:26ZengSciendoCroatian Review of Economic, Business and Social Statistics2459-56162021-05-0171435910.2478/crebss-2021-0004Auction theory and a note on game mechanismsJosheski Dushko0Karamazova Elena1University Goce Delcev-Shtip, R. North MacedoniaUniversity Goce Delcev-Shtip, R. North MacedoniaThis paper will review important topics on the subject of auction theory and mechanism design, these include: efficiency first and foremost, also revenue comparison between different types of auctions and the issue of incentive compatibility, individual rationality with the general idea and proof that bilateral trade is inefficient. Mechanism design theory tells us that if buyers and sellers both have private information full efficiency is impossible, however Vickrey auction (single unit auction) will be efficient i.e. will put the goods in the hands of the buyers that value them most. However, the conclusion from this paper is that because of overvaluation of bidders the main result is inefficient, i.e. bids are too high. When weak and strong bidders are compared the main conclusion is that strong bidders’ expected payoff is higher in second price auction (SPA), while weak bidder prefers first price auction (FPA) bid.https://doi.org/10.2478/crebss-2021-0004asymmetric auctionsfirst price auctiongreen-laffontmyerson-satterthwaitesecond price auctiond44d82 |
| spellingShingle | Josheski Dushko Karamazova Elena Auction theory and a note on game mechanisms Croatian Review of Economic, Business and Social Statistics asymmetric auctions first price auction green-laffont myerson-satterthwaite second price auction d44 d82 |
| title | Auction theory and a note on game mechanisms |
| title_full | Auction theory and a note on game mechanisms |
| title_fullStr | Auction theory and a note on game mechanisms |
| title_full_unstemmed | Auction theory and a note on game mechanisms |
| title_short | Auction theory and a note on game mechanisms |
| title_sort | auction theory and a note on game mechanisms |
| topic | asymmetric auctions first price auction green-laffont myerson-satterthwaite second price auction d44 d82 |
| url | https://doi.org/10.2478/crebss-2021-0004 |
| work_keys_str_mv | AT josheskidushko auctiontheoryandanoteongamemechanisms AT karamazovaelena auctiontheoryandanoteongamemechanisms |