Efficiency and revenue in asymmetric auctions

Kyungmin Kim, Youngwoo Koh

Research output: Contribution to journalArticle

Abstract

We study the efficiency and revenue properties of first-and second-price auctions in an environment where bidders’ values are drawn from different binary distributions. We identify a necessary and sufficient condition for a first-price auction to induce an efficient allocation. The condition reveals the source of allocative inefficiencies in asymmetric first-price auctions. We further show that the seller’s revenue is higher in a second-price auction than it is in a first-price auction whenever allocations in the two auction formats are efficient. We highlight how the difference in different bidder types’ beliefs induces the results.

Original languageEnglish (US)
Pages (from-to)371-391
Number of pages21
JournalKorean Economic Review
Volume35
Issue number2
StatePublished - Jan 1 2019
Externally publishedYes

Keywords

  • Asymmetric Auctions
  • Ex Ante Bidder Asymmetry
  • Revenue Equivalence

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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