Premium
Basic auction theory revisited
Author(s) -
Dastidar Krishnendu Ghosh
Publication year - 2015
Publication title -
international journal of economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 11
eISSN - 1742-7363
pISSN - 1742-7355
DOI - 10.1111/ijet.12054
Subject(s) - common value auction , economics , microeconomics , equivalence (formal languages) , revenue equivalence , mathematical economics , revenue , auction theory , function (biology) , benchmark (surveying) , vickrey auction , econometrics , mathematics , finance , geodesy , discrete mathematics , evolutionary biology , biology , geography
We revisit the benchmark model of auctions and consider a more general class of utility functions that allow for income effects. We assume that all individuals have the same utility function but have different incomes. Incomes are private information. We analyze first‐price, second‐price, and all‐pay auctions and show that non‐quasilinearity changes many basic results of the benchmark model. While Vickrey's ([Vickrey, W., 1961]) result on second‐price auctions is very robust, revenue equivalence breaks down even with risk‐neutral bidders, high enough incomes and identically and independently distributed types. In most cases, we find that all‐pay auctions fetch the highest expected revenue.