I thank the Canada Research Chairs programme and the Social Sciences and Humanities Research Council of Canada for funding this research. I am grateful for several comments and suggestions from the editor and three anonymous referees. I also thank Bernard Lebrun, Ruqu Wang, and audiences at the University of Arizona, the University of Guelph, Queen's University, and the 10th SEAT conference. I thank A. Marcel Oestreich for research assistance.
A Mechanism Design Approach to Ranking Asymmetric Auctions
Version of Record online: 25 SEP 2012
© 2012 The Econometric Society
Volume 80, Issue 5, pages 2349–2364, September 2012
How to Cite
Kirkegaard, R. (2012), A Mechanism Design Approach to Ranking Asymmetric Auctions. Econometrica, 80: 2349–2364. doi: 10.3982/ECTA9859
- Issue online: 25 SEP 2012
- Version of Record online: 25 SEP 2012
- Manuscript received February, 2011; final revision received December, 2011.
- Asymmetric auctions;
- mechanism design;
- revenue ranking
I propose a new mechanism design approach to the problem of ranking standard auctions with two heterogeneous bidders. A key feature of the approach is that it may be possible to rank two auctions even if neither dominates the other for all combinations of types. The approach simplifies the analysis and unifies results in the existing literature. Roughly speaking, the first-price auction is more profitable than the second-price auction when the strong bidder's distribution is flatter and more disperse than the weak bidder's distribution. Applications include auctions with one-sided externalities. Moreover, contrary to previous work, reserve prices are easily handled. Finally, the method can be extended to some environments with many bidders.