Entry of painters in the Amsterdam market of the Golden Age

We analyze the evolution of the entry of painters and price of paintings in the XVII century Amsterdam art market. In line with evolutionary theory, demand-driven entry in the market was first associated with product innovations and a rapid increase in the number of painters. After reaching a peak, the number of painters started to decrease in parallel with a price decline and the introduction of process innovations. To test for the role of profitability in the art market as a determinant of endogenous entry of painters, we build a price index for the representative painting inventoried in Dutch houses. This is based on hedonic regressions controlling for characteristics of the paintings (size, genre, placement in the house), the owners (job, religion, value of the collection, size of the house) and the painters. After a peak at the beginning of the century, the real price of paintings decreased until the end of the century. We provide anecdotal evidence for which high initial prices attracted entry of innovators, and econometric evidence on the causal relation between price movements and entry.     

Entry and Competition Effects in First-Price Auctions: Theory and Evidence from Procurement Auctions

Motivated by several interesting features of the highway mowing auction data from the Texas Department of Transportation (TDoT), we study three competing procurement auction models with endogenous entry. Our entry and bidding models provide several interesting implications. For the first time, we show that even within an independent private value paradigm, as the number of potential bidders increases, bidders' equilibrium bidding behaviour can become less aggressive, and the expected procurement cost may rise because the "entry effect" is always positive and may dominate the negative "competition effect". We then develop structural models of entry and bidding corresponding to the three models under consideration, controlling for unobserved auction heterogeneity, and use the recently developed semi-parametric Bayesian estimation method to analyse the data. We select the model that best fits the data, and use the corresponding structural estimates to quantify the "entry effect" and the "competition effect" with regard to the individual bids and the procurement cost.     

Creative Destruction, Investment Volatility, and the Average Age of Capital

In this article, a new numerical procedure is used to compute the equilibrium of a vintage capital growth model with nonlinear utility, where the scrapping time is nonconstant. We show that equilibrium investment and output converge nonmonotonically to the balanced growth path due to replacement echoes. We find that the average age of capital is inversely related to output, which is consistent with recent micro evidence reinforcing the importance of the embodied question. We also find that an unanticipated permanent increase in the rate of embodied technological progress causes labor productivity to slowdown in the short run.     

Optimal Information Disclosure in Auctions and the Handicap Auction

We analyse a situation where a monopolist is selling an indivisible good to risk-neutral buyers who only have an estimate of their private valuations. The seller can release, without observing, certain additional signals that affect the buyers' valuations. Our main result is that in the expected revenue-maximizing mechanism, the seller makes available all the information that she can, and her expected revenue is the same as it would be if she could observe the part of the information that is "new" to the buyers. We also show that this mechanism can be implemented by what we call a handicap auction in interesting applications. In the first round of this auction, each buyer picks a price premium from a menu offered by the seller (a smaller premium costs more). Then the seller releases the additional signals. In the second round, the buyers bid in a second-price auction where the winner pays the sum of his premium and the second highest non-negative bid. In the case of a single buyer, this mechanism simplifies to a menu of European call options.     

Bottom-Fishing and Declining Prices in Sequential Auctions

We study standard sequential auctions, in which the seller chooses the order of sale, and right-to-choose auctions, in which the winner chooses her preferred item from the remaining items. Empirically, prices in sequential auctions tend to decline, and sellers often hold right-to-choose auctions. In our setting, the right-to-choose format guarantees declining prices and efficiency. In the standard auction, a buyer may submit a low bid for the first item ("bottom-fishing") despite its being her less-preferred item. An example shows that the standard auction has declining prices, is inefficient, and gives lower expected revenue than the right-to-choose. Journal of Economic Literature Classification Numbers: D44, D82.     

Auctions of licences and market structure

Summary. This paper studies sequential auctions of licences to participate in a symmetric market game. Assuming that the rate at which industry profits decrease with repeated entry is not too large, at the unique solution either a single firm preempts entry altogether or entry occurs in every stage, depending on the net benefit of complete preemption to an incumbent. If we relax the assumption, a third outcome can occur: two firms may coordinate their choices to avoid further entry. The analysis employs a new refinement of Nash equilibrium, the concept of recursively undominated equilibrium. Received: February 25, 2000; revised version: September 12, 2000     

Endogenous Entry and Exit in Common Value Auctions

We develop and experimentally test a model of endogenous entry, exit, and bidding in common value auctions. The model and experimental design include an alternative profitable activity (a safe haven) that provides agentspecific opportunity costs of bidding in the auction. Each agent chooses whether to accept the safe haven income or forgo it in order to bid in the auction. Agents that enter the auction receive independently-drawn private signals that provide unbiased estimates of the common value. The auctioned item is allocated to the high bidder at a price that is equal to the high bid. Thus the market is a first-price sealed-bid common value auction with endogenous determination of market size.     

Quantal Response Equilibrium and Overbidding in Private-Value Auctions

This paper applies the quantal response equilibrium (QRE) model to study overbidding in private-values auctions. Experimental evidence shows that the prevalence of overbidding depends on the cost of overbidding relative to underbidding, as predicted theoretically. We use QRE as an error structure to estimate parameters of several competing models of overbidding. A QRE model based on risk averse bidders closely tracks the exact distribution of bids. The estimated parameters are significant and consistent across treatments. Journal of Economic Literature Classification Numbers: C72, C92, D44.     

Profit Maximizing in Auctions of Public Goods

A profit-maximizing auctioneer can provide a public good to a group of agents. Each group member has a private value for the good being provided to the group. We investigate an auction mechanism where the auctioneer provides the good to the group only if the sum of their bids exceeds a reserve price declared previously by the auctioneer. For the two-bidder case with private values drawn from a uniform distribution we characterize the continuously differentiable symmetric equilibrium bidding functions for the agents, and we find the optimal reserve price for the auctioneer when such functions are used by the bidders. We also examine another interesting family of equilibrium bidding functions for this case, with a discrete number of possible bids, and show the relation (in the limit) to the differentiable bidding functions.     

Bundling and Optimal Auctions of Multiple Products

We study the optimal ( i.e. revenue maximizing) auction of multiple products. We make three major points. First, we extend the relationship between price discrimination and optimal auctions from the single-product case to the multiple-product case. A monopolist setting prices for multiple products may offer discounts on purchases of bundles of products; similarly, the optimal auction of multiple products facilitates price discrimination by allocating products inefficiently to customers who are willing to purchase both products. Second, we demonstrate that optimal auctions are qualitatively distinct from monopoly sales of multiple products. Because of uncertainty about the values of other consumers, two products are bundled probabilistically in an optimal auction for a customer who is willing to buy both of them. A customer may then receive a discount on a lower-valued product without receiving a higher-valued product. Third, we show that in an optimal auction of two products the allocation of one product may vary with the amount of competition for the other product.     

A Study of Collusion in First-Price Auctions

This paper examines the bidding for school milk contracts in Florida and Texas during the 1980s. In both states firms were convicted of bid-rigging. The data and legal evidence suggest that the cartels in the two states allocate contracts in different ways: One cartel divides the market among members, while the other cartel also uses side payments to compensate members for refraining from bidding. We show that both forms of cartel agreements are almost optimal, provided the number of contracts is sufficiently large.
In the auction the cartel bidder may face competition from non-cartel bidders. The presence of an optimal cartel induces an asymmetry in the auction. The selected cartel bidder is bidding as a representative of a group and has on average a lower cost than a non-cartel bidder. The data support the predicted equilibrium bidding behaviour in asymmetric auctions in accordance with optimal cartels.     

Asymmetric Information and Adverse Selection in Mauritian Slave Auctions

Information asymmetry is a necessary prerequisite for testing adverse selection. This paper applies this sequence of tests to Mauritian slave auctions. The theory of dynamic auctions with private and common values suggests that when an informed participant is known to be active, uninformed bidders will be more aggressive and the selling price will be higher. We conjecture that observable family links between buyer and seller entailed superior information and find a strong price premium when a related buyer purchased a slave, indicative of information asymmetry. We then test for adverse selection using sale motivation. Our results indicate large discounts on voluntary as compared to involuntary sales. Consistent with adverse selection, the market anticipated that predominantly low-productivity slaves would be brought to the market in voluntary sales.     

Designing Multi-unit Multiple Bid Auctions: An Agent-based Computational Model of Uniform, Discriminatory and Generalised Vickrey Auctions

Multi-unit auctions are being used by public agencies to allocate resources and to purchase services. These auctions resolve the lumpy bid problem inherent in single-bid auctions by allowing bidders to submit a supply or demand schedule. However, the choice of pricing formats for multi-unit auctions is controversial. Neither economic theory nor laboratory experiments depict a complete picture of how alternative pricing formats perform in terms of budgetary or allocative efficiency. This paper constructs an agent-based computational model to compare uniform, discriminatory and generalised Vickrey pricing formats under different degrees of competition and heterogeneity in the bidder population.     

网上拍卖竞买者出价来到过程的特征研究

本文利用从eBay网站收集的20个子类物品拍卖数据,通过基于MatLab编写的计算机程序,对竞买者出价来到过程的时段性、自相似性和幂律分布特征进行了研究,结果显示网上拍卖竞买者出价来到过程存在显著的后期出价现象,较长期限的拍卖能够减弱竞买者后期出价现象,且各类别拍卖的冷淡期呈现一定的规律;竞买者出价来到过程具有自相似性和幂律分布特征,受一自组织过程的驱动,但在不同拍卖时段有着不同的表现     

A Simple Model of Expert and Non-Expert Bidding in First-Price Auctions

This paper studies the equilibrium bidding behavior in a first-price sealed-bid auction when the number of informed bidders is not common knowledge. Both the independent private values and the common value cases are analyzed, under the assumption that a “neutral” signal exists. In equilibrium, experts and non-experts draw their bids from distinct supports: experts bid in the upper and lower tail of the bidding distribution and non-experts randomize their bids in between. For common values, it is shown that the seller's expected revenue always decreases with the probability of a bidder being informed when this probability is small. The opposite result is shown for the case of independent private values.Journal of Economic LiteratureClassification Numbers: D44, D82.     

Auctions and Regulation: Reengineering of Regulatory Mechanisms**

The FCC auctions, beginning in July 1994, were a watershed event in what may be best called reengineering regulation. It was the first time a new market mechanism, in the form of an auction, had been developed especially to replace traditional administrative procedures for regulating access to a natural resource. The spectrum auctions, and the soon to follow trading in SO₂ emission rights were the two initial instances in which game theory, and more specifically auction theory, played an essential role in the design of an market-based allocation process. The FCC developed a novel auction format for the spectrum auctions. The replacing of administrative regulatory processes with market mechanisms is a major innovation in regulation, or perhaps more accurately, deregulation.     

Partial Pooling at the Reserve Price in Auctions with Resale Opportunities

Two features common to many auctions are the use of reserve prices and the existence of secondary markets for the goods being sold. Even in simple symmetric settings, the combination of these features can preclude existence of an equilibrium in symmetric separating bidding strategies. With a reserve price sufficiently far below the maximum (endogenous) valuation, a symmetric equilibrium still exists, but with some types pooling at the reserve. The optimal reserve price depends not only on the joint distribution of bidders' information before and after the auction, but also on how surplus is divided in the secondary market. Journal of Economic Literature Classification Numbers: D44, C7, L1, D82     

Bidders' and Sellers' Strategies in Sequential Auctions. New Evidence about the Afternoon Effect

Using dynamic panel data econometric techniques, we analyzethe price structure of sequential auctions of modern and contemporary art that took place inItaly during the period 1983–1996. Contrary to previous empirical studies, we do not find anyafternoon effect, or decline of auction prices relative to estimated values. Taking intoconsideration the structure of the auctions and the dynamic nature of price determination, we proposean interpretation of the empirical results that encompasses previous contributions.     

Unique Implementation of the Full Surplus Extraction Outcome in Auctions with Correlated Types

In auctions with correlated types it is possible to design mechanisms such that full surplus extraction can be obtained as the outcome of an equilibrium in which agents use (weakly) dominant strategies. However, it is not assured that the outcome is unique. We present an example in which no mechanism can yield the full surplus extraction outcome as the unique Bayesian equilibrium outcome. Next we show that in the standard auction model the multiplicity problem can be fully resolved using sequential mechanisms, i.e., we show that it is possible to obtain the full surplus extraction outcome as the unique perfect Bayesian equilibrium outcome.Journal of Economic LiteratureClassification Numbers: D44; D70.