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Auctions & Mechanism Design

Paper Session

Saturday, Jan. 5, 2019 8:00 AM - 10:00 AM

Atlanta Marriott Marquis, L503
Hosted By: Econometric Society
  • Chair: Scott Duke Kominers, Harvard University

Knowing What Matters to Others: Information Selection in Auctions

Nina Bobkova
,
European University Institute (EUI)

Abstract

The valuation of bidders for an object consists of a common value component
(which matters to all bidders) and a private value component (which is relevant
only to individual bidders). Bidders select about which of these two components they
want to acquire noisy information. Learning about a private component yields independent
estimates, whereas learning about a common component leads to correlated
information between bidders. In a second-price auction, I show when bidders only learn
about their private component, so an independent private value framework and efficient
outcome arises endogenously. In a first-price auction, every robust equilibrium is inefficient
under certain conditions. In the all-pay auction, in any equilibrium bidders prefer
information about the more relevant component.

Crowdsourcing and Optimal Market Design

Bobak Pakzad-Hurson
,
Brown University

Abstract

Solutions to many allocation problems crucially rely on the assumption that agents fully know their preferences over objects to be allocated. I present a general crowdsourcing approach for solving mechanism design problems in which important characteristics of objects are imperfectly observed by agents. The designer first solicits reports of object characteristics by agents and assigns each object a characteristic using a quasi-maximum likelihood method. Second, the designer runs an off-the-shelf “full-information” mechanism using the assessed characteristics. To ensure truth-telling incentives, agents are punished when their reports do not match up with the “wisdom of the crowd.” Assuming mild conditions on the relative growth rates of agents and objects, I show this approach yields the same allocation as in the full-information case with probability exponentially converging to one in the number of agents, with aggregate worst-case waste (punishment) converging exponentially to zero. Neither the aggregation nor punishment schemes rely on details of the market. Therefore, my approach is the first to generate near-optimal outcomes with high probability in a variety of settings, including two-sided matching markets, with interdependent preferences. I give necessary and sufficient conditions for recovering desirable properties when signal acquisition is endogenous and costly for agents.

Mechanism Design with Ambiguous Transfers

Huiyi Guo
,
Texas A&M University

Abstract

This paper introduces ambiguous transfers to the problems of full surplus extraction and implementation. The mechanism designer commits to one transfer rule but informs agents of a set of potential ones. Without knowing the adopted transfer rule, agents are assumed to make decisions based on the worst-case expected payoffs. A key condition in this paper is the Beliefs Determine Preferences (BDP) property, which requires an agent to hold distinct beliefs about others' information under different types. We show that full surplus extraction can be guaranteed via ambiguous transfers if and only if the BDP property is satisfied by all agents. In addition, all efficient allocations are implementable via individually rational and budget-balanced mechanisms with ambiguous transfers if and only if the BDP property holds for all agents. This necessary and sufficient condition is weaker than those for full surplus extraction and implementation via Bayesian mechanisms. Therefore, ambiguous transfers can achieve first-best outcomes that are impossible under the standard approach. In particular, with ambiguous transfers, efficient allocations become implementable generically in two-agent problems, a result that does not hold under a Bayesian framework.

Auctions with Entry Versus Entry in Auctions

Jiafeng Chen
,
Harvard University
Scott Duke Kominers
,
Harvard University

Abstract

We show that an auctioneer may prefer to restrict entry by exacting an admission fee to having an extra potential bidder in an auction setting with endogenous bidder entry. We also highlight that admission fees and reserve prices are different instruments in a setting with uncertainty over entry costs, and that optimal mechanisms in such settings may be higher-dimensional than in Myerson (1981). Our results provide a counterpoint to the broad intuition of Bulow and Klemperer (1996) that market thickness often takes precedence over market power in auction design.
Discussant(s)
Xianwen Shi
,
University of Toronto
Rahul Deb
,
University of Toronto
Luciano de Castro
,
University of Iowa
Benjamin Brooks
,
University of Chicago
JEL Classifications
  • D4 - Market Structure, Pricing, and Design
  • D8 - Information, Knowledge, and Uncertainty