Essays on competitive and strategic bidding in multi-object auctions
<p>This thesis addresses four important issues in multi-object auction markets, focusing on a theory of strategic bidding and corresponding empirical evidence, on questions of equilibrium existence with distributional preferences, and on the equivalence of market objectives.</p> <p&g...
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| Format: | Thesis |
| Language: | English |
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2022
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| _version_ | 1797109049714540544 |
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| author | Finster, S |
| author2 | Klemperer, P |
| author_facet | Klemperer, P Finster, S |
| author_sort | Finster, S |
| collection | OXFORD |
| description | <p>This thesis addresses four important issues in multi-object auction markets, focusing on a theory of strategic bidding and corresponding empirical evidence, on questions of equilibrium existence with distributional preferences, and on the equivalence of market objectives.</p>
<p>The product-mix auction (PMA) designed by Paul Klemperer is used by the Bank of England to allocate loans to commercial banks at least monthly. If only a few bidders were thought to be participating, strategic behaviour may harm efficiency. I develop a theoretical model of strategic bidding in the PMA that enables the comparison with other auction formats commonly used for the sale of differentiated substitutes. While the theory predicts that the considered auctions perform (nearly) identically in bidder surplus, revenue, and efficiency, I also show contrasting empirical evidence. In a virtual lab experiment, the PMA achieves highest bidder surplus and efficiency. When bidders are symmetric, payoffs in the PMA are even between 90% and 156% higher and efficiency is 12% higher than in other auctions.</p>
<p>The product-mix auction was developed for substitute preferences, but similar concepts may be useful in markets with substitutes and complements. Extending the product-mix preferences and bidding language, I consider an even richer market with substitutes, complements, and distributional preferences. In this market, the seller can favour, e.g., a more concentrated allocation of products among buyers, or an even distribution of products. This type of preference, while common in many real world applications, is novel in the literature. I develop a graph-based bidding language and derive new results on the existence of competitive (Walrasian) equilibria, which can be computed via linear programming. The auction design I develop guarantees fair and transparent pricing.</p>
<p>In the context of substitutes, it is often practical for buyers to state their preferences with a budget. This may be spent on several products, while trade-offs between those products are stated as prices. Without budget constraints, it is known that revenue and welfare optimum may not coincide. We show, however, that with budget constraints, the market objectives of maximising revenue and maximising welfare result in the same, unique, market clearing prices and the same allocation. Our proof of this result also constructs an algorithm to identify these prices.</p> |
| first_indexed | 2024-03-07T07:36:37Z |
| format | Thesis |
| id | oxford-uuid:8d29245f-2120-42ec-828a-ecb8788a1189 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T07:36:37Z |
| publishDate | 2022 |
| record_format | dspace |
| spelling | oxford-uuid:8d29245f-2120-42ec-828a-ecb8788a11892023-03-09T11:54:16ZEssays on competitive and strategic bidding in multi-object auctionsThesishttp://purl.org/coar/resource_type/c_db06uuid:8d29245f-2120-42ec-828a-ecb8788a1189Experimental economicsMicroeconomicsEconCSEnglishHyrax Deposit2022Finster, SKlemperer, P<p>This thesis addresses four important issues in multi-object auction markets, focusing on a theory of strategic bidding and corresponding empirical evidence, on questions of equilibrium existence with distributional preferences, and on the equivalence of market objectives.</p> <p>The product-mix auction (PMA) designed by Paul Klemperer is used by the Bank of England to allocate loans to commercial banks at least monthly. If only a few bidders were thought to be participating, strategic behaviour may harm efficiency. I develop a theoretical model of strategic bidding in the PMA that enables the comparison with other auction formats commonly used for the sale of differentiated substitutes. While the theory predicts that the considered auctions perform (nearly) identically in bidder surplus, revenue, and efficiency, I also show contrasting empirical evidence. In a virtual lab experiment, the PMA achieves highest bidder surplus and efficiency. When bidders are symmetric, payoffs in the PMA are even between 90% and 156% higher and efficiency is 12% higher than in other auctions.</p> <p>The product-mix auction was developed for substitute preferences, but similar concepts may be useful in markets with substitutes and complements. Extending the product-mix preferences and bidding language, I consider an even richer market with substitutes, complements, and distributional preferences. In this market, the seller can favour, e.g., a more concentrated allocation of products among buyers, or an even distribution of products. This type of preference, while common in many real world applications, is novel in the literature. I develop a graph-based bidding language and derive new results on the existence of competitive (Walrasian) equilibria, which can be computed via linear programming. The auction design I develop guarantees fair and transparent pricing.</p> <p>In the context of substitutes, it is often practical for buyers to state their preferences with a budget. This may be spent on several products, while trade-offs between those products are stated as prices. Without budget constraints, it is known that revenue and welfare optimum may not coincide. We show, however, that with budget constraints, the market objectives of maximising revenue and maximising welfare result in the same, unique, market clearing prices and the same allocation. Our proof of this result also constructs an algorithm to identify these prices.</p> |
| spellingShingle | Experimental economics Microeconomics EconCS Finster, S Essays on competitive and strategic bidding in multi-object auctions |
| title | Essays on competitive and strategic bidding in multi-object auctions |
| title_full | Essays on competitive and strategic bidding in multi-object auctions |
| title_fullStr | Essays on competitive and strategic bidding in multi-object auctions |
| title_full_unstemmed | Essays on competitive and strategic bidding in multi-object auctions |
| title_short | Essays on competitive and strategic bidding in multi-object auctions |
| title_sort | essays on competitive and strategic bidding in multi object auctions |
| topic | Experimental economics Microeconomics EconCS |
| work_keys_str_mv | AT finsters essaysoncompetitiveandstrategicbiddinginmultiobjectauctions |