Advances in pay-as-bid auctions

Advances in pay-as-bid auctions

This gives a novel explanation for the ambiguity of empirical results surrounding mechanism selection. If sellers expend as much resources optimising within a mechanism because they do choosing which mechanism to implement, empiricists should witness roughly the same outcomes whichever of the pay-as-bid or uniform-price auctions is implemented.

Concluding remarks

Understanding bidder behaviour in divisible-good pay-as-bid auctions is very important to the debate over which of the pay-as-bid or uniform-price auctions ought to be implemented used, and these auction formats are accustomed to allocate trillions of dollars of goods annually. Realizing that equilibrium actions are well-defined, and they may have a tractable closed-form representation shows that structural empirical studies of auctions can correctly infer unobserved outcomes of the pay-as-bid auction. The recent work discussed above presents a rich group of results that may empower policy decisions in valuable markets.

References

Armantier O and E Sbaï (2006), “Estimation and comparison of treasury auction formats when bidders are asymmetric”, Journal of Applied Econometrics.

Athey, S (2001), “Single crossing properties and the existence of pure strategy equilibria in games of incomplete information”, Econometrica.

Ausubel, L, P Cramton, M Pycia, M Rostek, and M Weretka (2014), “Demand reduction and inefficiency in multi-unit auctions”, Overview of Economic Studies.

Brenner, M, D Galai, and O Sade (2009), “Sovereign debt auctions: Uniform or discriminatory?”, Journal of Monetary Economics.

S Castellanos and M Oviedo (2004), “Optimal bidding in the Mexican treasury securities primary auctions: Results from a structural economics approach”, Mimeo.

Federico G and D Rahman (2003), “Bidding within an electricity pay-as-bid auction”, Journal of Regulatory Economics.

Février, P, R Préget, and M Visser (2004), “Econometrics of share auctions”, Mimeo.

Heller, D and Y Lengwiler (2001), “If the treasury price-discriminate? An operation for computing hypothetical bid functions”, Journal of Institutional and Theoretical Economics.

Holmberg, P (2009), “Supply function equilibria of pay-as-bid auctions”, Journal of Regulatory Economics.

Hortaçsu, A and D McAdams (2010), “Mechanism choice and strategic bidding in divisible good auctions: An empirical analysis of the Turkish treasury auction market”, Journal of Political Economy.

Kang, B-S and S Puller (2008), “The result of auction format on efficiency and revenue in divisible goods auctions: A test using Korean treasury auctions”, The Journal of Industrial Economics.

Kastl, J (2012), “On the properties of equilibria in private value divisible good auctions with constrained bidding”, Journal of Mathematical Economics.

Maurer, L and L Barroso (2011), Electricity auctions: A synopsis of efficient practices, World Bank Publications.

McAdams, D (2003), “Isotone equilibrium in games of incomplete information”, Econometrica.

Pycia, M and K Woodward (2014), “Pay-as-bid: Selling divisible goods to uninformed bidders”, Mimeo.

Wang, J and J Zender (2002), “Auctioning Divisible Goods”, Economic Theory.

Wilson, R (1979), “Auctions of shares”, The Quarterly Journal of Economics.

Woodward, K (2014), “Strategic ironing in pay-as-bid auctions”, Mimeo.

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