Types Of Auctions Research Articles

Transparency and Liquidity: A Comparison of Auction and Dealer Markets with Informed Trading

ABSTRACTTrading systems differ in their degree of transparency, here defined as the extent to which market makers can observe the size and direction of the current order flow. We investigate whether greater transparency enhances market liquidity by reducing the opportunities for taking advantage of uninformed participants. We compare the price formation process in several stylized trading systems with different degrees of transparency: various types of auction markets and a stylized dealer market. We find that greater transparency generates lower trading costs for uninformed traders on average, although not necessarily for every size of trade.

Uma Introdução à Teoria de Leilões

In this paper we provide an introduction to the theory of auctions of a single object. For the private-values independent-signals model we show that the four types of auctions - first and second-price scaled-bid auctions, English and Dutch auctions - generate the same revenue. We also show that the revenue equivalence thcorem holds when values are common. Further, we show that the winner's curse (a situation where the winner in a first-price sealed-bid auction can pay a price higher than the true value of the object) is not consistent with Nash behavior. That is, the winner's curse is a result of suboptimal strategies. Finally, we argue that when signals are statistically dependent, the revenue equivalence theorem breaks down.

On Nash implementation of Walrasian equilibria in a market for pure indivisibles without money

This paper deals with the Walrasian property of Nash and strong equilibria of a specific strategic market game which refers to a pure exchange economy involving purely indivisible commodities and no money. The game is of sealed-bid auction type and it is shown that any Nash equilibrium at which no agent is in status quo is a strong equilibrium and implements a Walrasian equilibrium. Moreover, it appears that two modifications of the game's rules ensure that any strong equilibrium outcome is Walrasian. These results are identical to those obtained by Svensson for markets involving purely indivisible goods and money.

Complexity models in financial markets

In this approach, the complexity of the self-organizing microstructure of the stock exchange is explicitly taken into consideration: the process of offers and trades as well as the adjustment of individual expectations are modelled with help of a (stochastic) jump process. Its abilities are illustrated by modelling the continuous quotations of asset prices at an auction type stock exchange. The functional form of the transition (hazard) rates is chosen to reflect the individual preferences and expectations as well as the economic environment. The model is described in detail and examples of Monte Carlo simulation results are presented.

Auctions: The Social Construction of Value.

Long the preferred method of exchange for antiques and horseflesh, auctions are used today to sell everything from bestselling books to real estate, government bonds to abandoned automobiles. As sociologist Charles Smith reveals, the mechanical law of supply and demand rarely governs the auction process. Rather value is determined by a complex social process combining both the beliefs and actions of the auction participants and the assumptions and practices on the auction floor. Based on years of participation in and observation of different types of auctions and interviews with hundreds of auctioneers, Smith gives us not only a theoretical understanding of the auction process but the sights and sounds as well.

Alternative Common-Value Auction Procedures: Revenue Comparisons with Free Entry

The logic of revenue comparisons for different types of common-value auctions is substantially altered if the number of participants, rather than being fixed, responds endogenously to the expected profitability from participating. In a thoroughly symmetric model, a seller may prefer that competition be indirect: an auction procedure in which fewer participants are needed to drive the expected profitability from participating down to the level obtainable in other auctions in the economy can attain higher expected revenue if a sale is sufficiently likely. This insight allows a complete revenue ranking of standard auction procedures, with endogenous entry.

Comparing Auctions for Risk Averse Buyers: A Buyer's Point of View

THE SELLER'S POINT OF VIEW is the predominant one taken in the literature. Much attention, for example, has been given to revenue equivalence theorems that state conditions under which a seller is indifferent between various types of auctions,3 and optimal auction theorems that characterize auctions which maximize the seller's expected profit.4 To offset this bias, in this paper auctions are compared from the point of view of the buyers. The first comparison is of a first-price (FPA), in which the high bidder wins and is charged a price equal to his own bid, to a second-price (SPA), in which the high bidder wins and is charged a price equal to the second highest bid. It is well-known that if the buyers are risk averse and have private i.i.d. values, each bidder's expected payment is greater in the FPA.5 A buyer nevertheless need not prefer the SPA, since his payment is a riskier random variable in the SPA than it is in the FPA.6 The two effects can exactly counteract each other: in Section 2 buyers with private i.i.d. values who exhibit constant absolute risk aversion (CARA) are shown to be indifferent between the two auctions. Thus,

Sealed bid auctions: an application to the building industry

This paper examines some of the theory and practice of competitive tendering in the building iildustry. Allocation of building contracts by means of competitive tendering is one type of sealed bid auction. T\vo main strands of the theory of sealed bid auctions are developed. The first strarul identifies optimal mark-up given that each tender competition occurs in isolution. The second strand treats explicitly the sequential nature of tendering and resource constraints of tenderers. It emerges that the first strand is a special case of the second. A simple optimal bid price rule is identijed, which indicates that bid price for any one contractor will be affected by theresources availuble to the contractor and general market conditions. It is shown that bid prices will be more competitive the better the information available to tenderers, the more carefully is the tender list constructed and the greater the number of firms invited to tender. It is further shown, however, that little is gained by having more...

Auctions and Alternative Procedures for Allocating Pollution Rights

This paper considers two different types of auctions which the government could use to sell discharge rights: (1) an auction where rights are sold for a single clearing price, and (2) a special type of discriminating auction that discourages strategic manipulation of bids by individual dischargers. Based on both theoretical and practical considerations, there appears to be a fundamental trade-off between reducing the financial burden of rights purchases and eliminating the incentives for strategic behavior. Very few discharges in either case study would have lower expenses under government sales of rights than under uniform treatment. The simulations also suggest that there may be opportunities for strategic behavior under nonincentive-compatible procedures because of small numbers of dischargers, despite its problems with respect to incentive compatibility, the right allocation approach of free distribution followed by exchange may offer the most desirable package of features. This approach can yield dischargers savings over the expenses of present uniform regulations as well as provide incentives for efficient allocation of treatment efforts. 25 references, 1 figure, 5 tables.