HOW RISK SHARING MAY ENHANCE EFFICIENCY OF ENGLISH AUCTIONS

Audrey Hu; Theo Offerman; Liang Zou

doi:10.1111/ecoj.12439

HOW RISK SHARING MAY ENHANCE EFFICIENCY OF ENGLISH AUCTIONS

Audrey Hu^*, Theo Offerman, Liang Zou

^*Corresponding author for this work

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

6 Citations (Scopus)

Abstract

English auctions are known to be ex post efficient under various circumstances. However, they are inefficient ex ante for risk‐averse seller and bidders. Our analysis of the English premium auction (EPA) reveals that, while maintaining ex post efficiency, awarding a premium to the highest two bidders makes the auction more attractive to all risk‐averse bidders. This result is remarkably general, as it holds with possible interdependent bidder valuations and affiliated types. When bidders exhibit independent types, the EPA can also benefit a risk‐averse seller and therefore strictly improve ex ante, or interim, Pareto efficiency of the English auction.

Original language	English
Pages (from-to)	1235–1256
Journal	Economic Journal
Volume	128
Issue number	610
Online published	22 Oct 2016
DOIs	https://doi.org/10.1111/ecoj.12439
Publication status	Published - May 2018
Externally published	Yes

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title = "HOW RISK SHARING MAY ENHANCE EFFICIENCY OF ENGLISH AUCTIONS",

abstract = "English auctions are known to be ex post efficient under various circumstances. However, they are inefficient ex ante for risk‐averse seller and bidders. Our analysis of the English premium auction (EPA) reveals that, while maintaining ex post efficiency, awarding a premium to the highest two bidders makes the auction more attractive to all risk‐averse bidders. This result is remarkably general, as it holds with possible interdependent bidder valuations and affiliated types. When bidders exhibit independent types, the EPA can also benefit a risk‐averse seller and therefore strictly improve ex ante, or interim, Pareto efficiency of the English auction. ",

author = "Audrey Hu and Theo Offerman and Liang Zou",

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language = "English",

volume = "128",

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AB - English auctions are known to be ex post efficient under various circumstances. However, they are inefficient ex ante for risk‐averse seller and bidders. Our analysis of the English premium auction (EPA) reveals that, while maintaining ex post efficiency, awarding a premium to the highest two bidders makes the auction more attractive to all risk‐averse bidders. This result is remarkably general, as it holds with possible interdependent bidder valuations and affiliated types. When bidders exhibit independent types, the EPA can also benefit a risk‐averse seller and therefore strictly improve ex ante, or interim, Pareto efficiency of the English auction.

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M3 - RGC 21 - Publication in refereed journal

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SP - 1235

EP - 1256

JO - Economic Journal

JF - Economic Journal

IS - 610

ER -

HOW RISK SHARING MAY ENHANCE EFFICIENCY OF ENGLISH AUCTIONS

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