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Auctions : Theory and Practice - Paul Klemperer

Auctions

Theory and Practice

Paperback Published: 28th March 2004
ISBN: 9780691119250
Number Of Pages: 264

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Governments use them to sell everything from oilfields to pollution permits, and to privatize companies; consumers rely on them to buy baseball tickets and hotel rooms, and economic theorists employ them to explain booms and busts. Auctions make up many of the world's most important markets; and this book describes how auction theory has also become an invaluable tool for understanding economics.

"Auctions: Theory and Practice" provides a non-technical introduction to auction theory, and emphasises its practical application. Although there are many extremely successful auction markets, there have also been some notable fiascos, and Klemperer provides many examples. He discusses the successes and failures of the one-hundred-billion dollar "third-generation" mobile-phone license auctions; he, jointly with Ken Binmore, designed the first of these.

Klemperer also demonstrates the surprising power of auction theory to explain seemingly unconnected issues such as the intensity of different forms of industrial competition, the costs of litigation, and even stock trading 'frenzies' and financial crashes.

Engagingly written, the book makes the subject exciting not only to economics students but to anyone interested in auctions and their role in economics.

"As a leader in auction-theory research and as a leading practitioner of auction design, Paul Klemperer is the best person to write the definitive book on auctions in theory and practice. This book ties together material on what economists should learn from auction theory, and on what auction theorists should learn from practical experience in auction design." - Roger B. Myerson, University of Chicago; "Paul Klemperer is one of the leaders in auction design worldwide. His emphasis in recent years on some of the more practical aspects of the theory - how to attract bidders, how to avoid collusion, how to think about government policy goals in designing public auctions - is particularly innovative. Klemperer's work will be very influential in the coming years." - Jeremy Myorson, Stanford University"

Prefacep. ix
Introductionp. 1
Introduction to the Theoryp. 1
A Survey of Auction Theoryp. 9
Introductionp. 9
Plan of this chapterp. 10
The standard auction typesp. 11
The basic models of auctionsp. 12
Bidding in the standard auctionsp. 13
Terminologyp. 14
Early Literaturep. 15
Introduction to the Recent Literaturep. 16
The Basic Analysis of Optimal Auctions, Revenue Equivalence, and Marginal Revenuesp. 16
Risk-Aversionp. 19
Correlation and Affiliationp. 20
Asymmetriesp. 21
Private value differencesp. 22
Almost-common-valuesp. 23
Information advantagesp. 24
Entry Costs and the Number of Biddersp. 25
Endogenous entry of biddersp. 25
The value of additional biddersp. 27
Information aggregation with large numbers of biddersp. 27
Unknown number of biddersp. 28
Collusionp. 28
Multi-Unit Auctionsp. 29
Optimal auctionsp. 29
Simultaneous auctionsp. 30
Sequential auctionsp. 31
Efficient auctionsp. 33
Royalties, Incentives Contracts, and Payments for Qualityp. 34
Double Auctions, etc.p. 35
Double auctionsp. 35
Related two-sided trading mechanismsp. 36
Other Topicsp. 36
Budget constraintsp. 37
Externalities between biddersp. 37
Jump biddingp. 38
The war of attritionp. 38
Competing auctioneersp. 39
Testing the Theoryp. 39
Conclusionp. 39
Appendix
The Revenue Equivalence Theoremp. 40
Marginal Revenuesp. 44
Affiliated Signalsp. 48
Examples Using the Uniform Distributionp. 51
Bibliographyp. 57
Afterwordp. 62
Exercisesp. 66
Applications to Other Areas of Economics
Why Every Economist should Learn some Auction Theoryp. 75
Introductionp. 76
Using Auction-Theoretic Tools in Economics: The Revenue Equivalence Theoremp. 77
Comparing litigation systemsp. 78
The war of attritionp. 79
Queuing and other "all-pay" applicationsp. 81
Solving for equilibrium behavior: market crashes and trading "frenzies"p. 81
Translating Looser Analogies From Auctions into Economics: Ascending vs. (First-Price) Sealed-Bid Auctionsp. 84
Internet sales vs. dealer salesp. 84
Anglo-Dutch auctions, a theory of rationing, and patent racesp. 88
Exploiting Deeper Connections between Auctions and Economics: Marginal Revenuesp. 89
Applying Auction Theory to Price-Setting Oligopoliesp. 92
Marginal-cost pricing is NOT the unique Bertrand equilibriump. 92
The value of new consumersp. 93
Information aggregation in perfect competitionp. 95
Applying Auction Theory (and Economics) to Auction Marketsp. 95
Important auction marketsp. 96
Applying economics to auction designp. 97
2.7 Conclusionp. 98
Appendixp. 2
Comparing Litigation Systemsp. 99
Direct Proof of Monopoly-Theoretic Version of Proposition in Section 2.4p. 100
Practical Auction Design
What Really Matters in Auction Designp. 103
Introductionp. 103
Collusionp. 104
Entry Deterrence and Predationp. 106
Other Pitfallsp. 109
Reserve pricesp. 109
Political problemsp. 109
Loopholesp. 110
Credibility of the rulesp. 111
Market structurep. 112
When is auction design less important?p. 113
Solutionsp. 113
Making the ascending auction more robustp. 113
Using sealed-bid auctionsp. 114
The Anglo-Dutch auctionp. 116
Antitrustp. 117
Tailoring Auction Design To The Contextp. 119
Conclusionp. 121
Using and Abusing Auction Theoryp. 123
Introductionp. 123
The Received Auction Theoryp. 126
Relevance of the received theoryp. 127
The Elementary Economic Theory that Mattersp. 131
Entryp. 131
Collusionp. 135
Robustness to Political Pressuresp. 138
Economic similarity-
Table of Contents provided by Publisher. All Rights Reserved.

ISBN: 9780691119250
ISBN-10: 0691119252
Series: The Toulouse Lectures in Economics
Audience: Tertiary; University or College
Format: Paperback
Language: English
Number Of Pages: 264
Published: 28th March 2004
Publisher: Princeton University Press
Country of Publication: US
Dimensions (cm): 23.7 x 17.3  x 1.6
Weight (kg): 0.35