TY - JOUR
T1 - Side-communication yields efficiency of ascending auctions
T2 - The two-items case
AU - Lavi, Ron
AU - Oren, Sigal
N1 - Funding Information: * Corresponding author. E-mail addresses: [email protected] (R. Lavi), [email protected] (S. Oren). 1 Supported by grants from the Israeli Science Foundation, the Bi-national Science Foundation, the Israeli Ministry of Science, and Google. 2 Work done while this author was at the Technion, supported by grants from the Israeli Science Foundation and the Bi-national Science Foundation.
PY - 2012/10/10
Y1 - 2012/10/10
N2 - We analyze a simultaneous ascending auction with anonymous item prices, for two items that are substitutes. This popular format entails increased opportunities for coordination among bidders, since bids are observable and can be used as signaling. This has happened, e.g., in the Netherlands 3G Telecom Auction and in the FCC auctions.While it may seem that such bidding harms economic efficiency, we show that side communication may actually improve efficiency: We describe an ex-post subgame-perfect equilibrium, with limited communication, that is ex-post efficient. In contrast, without communication, we show that there is no ex-post equilibrium which is ex-post efficient in this auction.In this equilibrium, bidders initially report true demands, and then perform a single demand reduction at a certain point, determined using a single message exchanged between the bidders. This limited signaling opportunity resolves the strategic problems of myopic bidding, and may improve the social welfare.
AB - We analyze a simultaneous ascending auction with anonymous item prices, for two items that are substitutes. This popular format entails increased opportunities for coordination among bidders, since bids are observable and can be used as signaling. This has happened, e.g., in the Netherlands 3G Telecom Auction and in the FCC auctions.While it may seem that such bidding harms economic efficiency, we show that side communication may actually improve efficiency: We describe an ex-post subgame-perfect equilibrium, with limited communication, that is ex-post efficient. In contrast, without communication, we show that there is no ex-post equilibrium which is ex-post efficient in this auction.In this equilibrium, bidders initially report true demands, and then perform a single demand reduction at a certain point, determined using a single message exchanged between the bidders. This limited signaling opportunity resolves the strategic problems of myopic bidding, and may improve the social welfare.
KW - Ex-post efficiency
KW - Myopic bidding
KW - Signaling
KW - Simultaneous ascending auctions
UR - http://www.scopus.com/inward/record.url?scp=84867130787&partnerID=8YFLogxK
U2 - https://doi.org/10.1016/j.geb.2012.05.011
DO - https://doi.org/10.1016/j.geb.2012.05.011
M3 - مقالة
SN - 0899-8256
VL - 76
SP - 439
EP - 456
JO - Games and Economic Behavior
JF - Games and Economic Behavior
IS - 2
ER -