Auctions for social lending: A theoretical analysis

Prosper, today the second largest social lending marketplace with nearly 1.5 million members and $380 million in funded loans, employed an auction mechanism amongst lenders to finance each borrower's loan until 2010. Given that a basic premise of social lending is cheap loans for borrowers, how does the Prosper auction do in terms of the borrower's payment, when lenders are strategic agents with private true interest rates? We first analyze the Prosper auction as a game of complete information and fully characterize its Nash equilibria, and show that the uniform-price Prosper mechanism, while simple, can lead to much larger payments for the borrower than the VCG mechanism. We next compare the Prosper mechanism against the borrower-optimal auction in an incomplete information setting, and conclude by examining the Prosper mechanism when modeled as a dynamic auction, and provide tight bounds on the price for a general class of bidding strategies.     

Single Object Auctions With Externalities: A Tractable Model

We consider the single object auction model with allocative externalities in a private valuation and quasi‐linear setting. We model externalities by assuming that every agent has a private valuation (for the object) and a strict ranking of other agents. The utility for an agent when another agent receives the object is the product of his own valuation and a real number that depends on the rank of this agent in his ranking. When the only private information is the valuation of the agents, we characterise the implementable allocation rules and use these to derive the optimal auction. The optimal auction collects payments from agents who do not receive the object.     

Rubinstein Auctions: On Competition for Bargaining Partners

This paper analyzes the effect of competition for bargaining partners on the prices that prevail in thin markets, as well as how the matches are simultaneously determined. Three trading processes or bargaining procedures are described. In all the variants that we consider, except for one case of public offers, either there is no pure strategy subgame perfect equilibrium or such equilibria exhibit delay in reaching agreement.Journal of Economic LiteratureClassification Numbers: C72, D43.     

Auctions for Universal Service Subsidies

The Telecommunications Act of 1996 requires that telephone service be available in high-cost areas at rates that are affordable and reasonably comparable to those charged in low-cost areas. It also requires that carriers serving high-cost areas at below-cost rates be compensated with explicit and sufficient subsidies. This paper analyzes an auction mechanism for the allocation of such subsidies. It shows that in a wide range of circumstances auctions are more efficient than traditional subsidy schemes. It also shows, however, that auction designs aimed at stimulating competition among several subsidized carriers may be particularly vulnerable to collusion.     

Testing for structural breaks with local smoothers: A simulation study

By means of an extensive Monte Carlo simulation study based on the design of Chen and Hong (2012) we compare the performance of the tests they proposed for parameter stability with the linearity test of Li et al. (2002) and the functional form test of Li and Wang (1998). We find that the test of Li et al. (2002) test adapted to testing for parameter stability performs favorably well in terms of size and equally well in terms of power compared with the others, whereas the test by Li and Wang has no power.     

A product diffusion model incorporating repeat purchases

A logistic-based model for forecasting the rate of product diffusion given aggregate time series data was constructed. The model differs from earlier models based on fitting the logistic to aggregate data in that it includes a submodel to separate replacement demand from first-time sales. We fit the theoretical model to data and show that forecasts will be significantly more accurate using this model instead of the logistic curve.     

Auctions With A Minimum Requirement Of Bids

We show that in a procurement auction with independent and private costs of production and a positive cost of preparing a bid, the requirement of a minimum number of offers for the good to be bought always yields a unique (perfect) Bayesian equilibrium where no firm enters a bid, whatever its cost of production, the number of potential bidders and the size of the bidding cost.
To avoid the no-bid result, the buyer can commit to subsidise the losing bidders in certain circumstances. Alternatively, it can use a stochastic auction, where the provider of the good is not always the firm that bids the lowest price.     

A structural model of competing sellers: Auctions and posted prices

In an original data set of goods listed for sale online, I observe that both auctions and posted prices are popular with buyers and sellers in the compact-disc market. To explain why these two mechanisms coexist, I estimate a structural model of competing sellers who differ in the value of their outside options. Buyers are allowed to value auctioned and posted-price goods differently but the estimated value distributions suggest that differences across buyers do not explain the mechanism coexistence that I observe. In contrast, differences across sellers' outside options are important: the value of the outside option segments the market with high outside-option sellers choosing to post a fixed price. There are two key forces at work that drive this empirical result. First, competition between sellers favors coexistence over an auction-only or a posted-price-only marketplace because sellers prefer to be in a market with fewer rivals. Second, sellers with more valuable outside options prefer the posted-price mechanism because posted-price goods sell less often than auctioned goods but at a higher price. As a result, a larger outside option reduces the loss from not selling and favors the posted-price mechanism.     

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.     

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.     

Asymptotic Efficiency for Discriminatory Private Value Auctions

We consider discriminatory auctions for multiple identical units of a good. Players have private values, possibly for multiple units. None of the usual assumptions about symmetry of players' distributions over values or symmetry of equilibrium play are made. Because of this, equilibria will typically involve inefficient allocations. Equilibria also become very difficult to solve for. Using an approach which does not depend on explicit equilibrium calculations we show that such auctions become arbitrarily close to efficient as the number of players, and possibly the number of objects, grows large, and provide a simple characterization of limit equilibria.     

Sequential versus Bundle Auctions for Recurring Procurement

We compare sequential and bundle procurement auctions in a framework of successive procurement situations, where current success positively or negatively affects future market opportunities. We find that in bundle auctions procurement cost is lower and less risky than in sequential standard auctions, but still higher than in the optimal sequential auction. Only a sequential second price auction leads to the efficient outcome.     

A micro-analytic threshold model for the timing of first purchases of durable goods

A micro-analytic threshold model to describe the timing of household purchases of consumer durable goods is developed and tested. The model incorporates unobserved heterogeneity via a generalized gamma distribution and accounts for time varying covariates. Further, we employ estimation methods applicable or purchase data observed at periodic intervals of time. The model outperforms other competing models for predicting the timing of purchase of durable goods in terms of fit and predictive ability. In particular, this model outperforms the logit model and the diffusion model. The generalized gamma timing model predicts well the time to purchase the durable good; we show how it can be employed for micro-segmentation of households. Several research directions and applications are described.     

Keynesian and monetarist models of unemployment and inflation: A simulation study for Austria

Zusammenfassung In dieser Arbeit wird versucht, durch Simulationen makroökonomischer Modelle für Österreich Aufschluß über die Erklärungskraft monetaristischer und keynesianischer Ansätze zu gewinnen. Zu diesem Zweck werden mit einer gemeinsamen Datenbasis über eine gemeinsame Schätzperiode (1957 bis 1982) drei monetaristische Modelle und ein keynesianisches Modell geschätzt, die möglichst viele gemeinsame Elemente enthalten, zugleich aber die wesentlichen theoretischen Unterschiede (insbesondere bezüglich struktureller Modelleigenschaften) zum Ausdruck bringen sollen. Untersucht werden ein von Stein vorgeschlagenes monetaristisches Modell und zwei Modelle, die die Hypothese der natürlichen Arbeitslosenrate enthalten, wobei das eine auf der Annahme adaptiver und das andere, das weitgehend einer Spezifikation von Sargent folgt, auf jener rationaler Erwartungen (also auf der Neuen Klassischen Makroökonomik) beruht; daneben wird ein keynesianisches Modell geschätzt, in dem die Arbeitslosenrate durch die gesamtwirtschaftliche Nachfrage und die Inflationsrate durch Kostenfaktoren und einen auch langfristig existierenden Phillips-Kurven-trade-off erklärt wird. Alle vier Modelle werden über die Schätzperiode mit den historischen Werten der jeweiligen exogenen Variablen simuliert; als Grundlage für eine Bewertung der Modelle dienen dabei Vergleiche der durch diese Simulation gewonnenen Schätzwerte für Arbeitslosenrate und Inflationsrate mit deren historischen Werten. Fehler- und Prädiktoranalysen zeigen, daß das keynesianische Modell den monetaristischen in bezug auf die meisten verwendeten Kriterien überlegen ist. Daher wird vermutet, daß die derzeit vorliegenden monetaristischen Ansätze weniger zur Erklärung der gesamtwirtschaftlichen Entwicklungen Österreichs und der Zusammenhänge zwischen den wichtigsten Aggregaten beitragen können als keynesianische Ansätze.

---

---

For many valuable comments and suggestions for improvement I am indebted to the anonymous referees of this journal and to A. Wörgötter. Any remaining shortcomings are my own responsibility.     

网上拍卖雇佣出价行为的研究

雇佣出价是卖方雇佣出价人(或卖方)扮作买方故意人为地抬高被拍卖物品的竞价.雇佣出价通常发生在拍卖价值较高的物品且竞买人对这些物品估价差异较大的情况下,这样卖方就能从欺诈中获得较高的收益.为了预防和检查雇佣出价行为,本文给出了一个使得雇佣出价无利可图的拍卖机制.这一机制强调拍卖人的作用,拍卖人根据中标价和卖方保留价之差收取佣金,佣金率在不同的拍卖市场是不同的,确保雇佣出价无利可图.     

Bidding and Information: Evidence from Gilt-edged Auctions

Many studies have shown that government debt auctions underprice debt compared with the secondary market. This paper corroborates this for certain forms of gilt auction by comparing the price received at auction with an almost identical parent stock in the secondary market. Although the sample is small, the parent/auction stock price comparison gives a cleaner measure than used in other studies. The paper also compares non-fungible auctions (where the auction stock differs slightly from the parent at auction and merges subsequently) with fully-fungible ones (where they are identical throughout). Significant underpricing only occurs in non-fungible auctions.     

Consumer support for environmental policies: An application to purchases of green cars

This paper focuses on how consumer motivation can be tapped in order to encourage the adoption of cleaner technologies. Consumers are heterogeneous — they may be guided by intrinsic motivation or extrinsic motivation. While information provision policies (such as the energy label for cars) may be effective in encouraging certain consumers to adopt green cars, financial incentive schemes (such as subsidies or fines) may be more persuasive for extrinsically-motivated consumers. We develop a dynamic theory of adoption of environmental innovations, in which information-provision policies are followed by financial incentives (first ‘carrot’, then ‘stick’ incentives). Analysis of a survey dataset of Swiss households observes considerable heterogeneity in terms of support of information-provision or financial incentive policies, in line with our conjectures. Our results will be of particular interest to policymakers interested in guiding consumers towards cleaner technologies.     

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.     

Multi-Dimensional Procurement Auctions for Power Reserves: Robust Incentive-Compatible Scoring and Settlement Rules

System operators in the electricity industry purchase reserve capacity in a procurement auction in which suppliers offer two-part bids, one part for making capacity available and another part for supplying incremental energy when called. Key ingredients of an efficient auction design are the scoring rule for comparing bids, and the settlement rule for paying accepted bids. We use the principle of incentive compatibility to establish that very simple rules suffice. In particular, the scoring rule uses only the capacity part of the bid, and energy supplies are paid the spot price. This is the design adopted in California.