The private value single item bisection auction

DOI10.1007/S00199-005-0032-ZMaRDI QIDQ852323zbMATH OpenOpenAlexFDO

Authors N. E. Zubov

Publication date 29 November 2006

Published in Economic Theory (Search for Journal in Brave)

Full work available at URL https://cris.maastrichtuniversity.nl/en/publications/5c973ca6-c1bb-41e5-afff-b6d300f2f88c

zbMATH Keywords

binary searchbisection auctionEnglish auctionextensive form games of incomplete informationinformation revelationsingle item auctionVickrey auctionweakly dominant strategy

Mathematics Subject Classification ID

Noncooperative games (91A10) Applications of game theory (91A80) Auctions, bargaining, bidding and selling, and other market models (91B26)

Review text

This paper presents and studies a new iterative auction, called bisection auction, which can be used for the sale of a single indivisible object. The authors propose a full game-theoretic analysis for the equilibrium properties of the bisection auction using as model a non-cooperative game in extensive form with imperfect information. The main results obtained can be stated as follow: (a) In the bisection auction, threshold strategies are sufficient from a strategic point of view. (b) The strategic equivalence of the bisection auction and the Vickrey auction (and hence to the English auction) is proved. (c) The bisection auction is incentive compatible, i.e. truth-telling is a weakly dominant strategy. This implies that when everyone tells the truth is efficient in the sense that the player with the highest valuation gets the bidet object. While being strategically equivalent to the Vickrey and English auctions, the bisection auction outperforms them since it needs fewer rounds than the English auction and causes less information to be revealed than the Vickrey auction. In the Vickrey auction, all players need to reveal their valuation, while for the English auction all bidders, except the bidder with the highest valuation, need to reveal their valuation. In the bisection auction, only the bidder with the second highest valuation has to reveal his valuation, all other bidders only reveal their valuation up to a precision required to determine the winner and the precise value of the second highest valuation. Moreover, the procedure used in the bisection auction guarantees a fast and predictable termination, in contrast to the English auction which is on average relatively show if it uses unit increments and risks inefficient allocations if it uses larger increments.

Recommendations

• Auctions with both common-value and private-value bidders
• Multidimensional private value auctions
• Auctioning divisible goods
• Auctions of heterogeneous objects
• An efficient ascending auction for private valuations
• Multiple unit auctions of an indivisible good
• The discrete bid first auction
• Efficiency of Large Private Value Auctions
• Bidding in a possibly common-value auction

Cites work

• Auction design with costly preference elicitation
• scientific article; zbMATH DE number 5547873 (Why is no real title available?)
• scientific article; zbMATH DE number 1966906 (Why is no real title available?)
• Incentives in Teams
• Microeconomic theory

Cited in

(12)

• Fraction auctions: the tradeoff between efficiency and running time
• On the fastest Vickrey algorithm
• Dynamic communication mechanism design
• A speedy auction using approximated bidders' preferences
• Multi-item Vickrey-English-Dutch auctions
• Bayesian improvement of the phantom voters rule: An example of dichotomic communication
• The communication complexity of private value single-item auctions
• Asking questions
• Polyhedral clinching auctions for two-sided markets
• One man, one bid
• On communication protocols that compute almost privately
• The communication cost of selfishness

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