How Risk Sharing may Enhance Efficiency of English Auctions | Zendy

Hu Audrey | Zendy; Offerman Theo | Zendy; Zou Liang | Zendy

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How Risk Sharing may Enhance Efficiency of English Auctions

Author(s) -

Hu Audrey,

Offerman Theo,

Zou Liang

Publication year - 2018

Publication title -

the economic journal

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 4.683

H-Index - 160

eISSN - 1468-0297

pISSN - 0013-0133

DOI - 10.1111/ecoj.12439

Subject(s) - common value auction , business , industrial organization , microeconomics , computer science , economics

English auctions are known to be ex post efficient under various circumstances. However, they are inefficient ex ante for risk‐averse seller and bidders. Our analysis of the English premium auction (EPA) reveals that, while maintaining ex post efficiency, awarding a premium to the highest two bidders makes the auction more attractive to all risk‐averse bidders. This result is remarkably general, as it holds with possible interdependent bidder valuations and affiliated types. When bidders exhibit independent types, the EPA can also benefit a risk‐averse seller and therefore strictly improve ex ante , or interim, Pareto efficiency of the English auction.

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