ECON 449 exam 1

eBay

-a second price auction in a dynamic setting -buyers can bid whenever -displayed price is the second-highest bid -winner is the highest bid and pays the displayed price when the auction ends -the price the winner will pay =second highest bid+increment

what differs in vickrey and japanese button auction

-auctioneers in vickrey auction see winners valuation in advances (bidders have to submit sealed bid in advance) while in japanese button auction the auctioneer could posibly never know the winners valuation because it stops as soon as he/she is the only one left.

English Outcry Auction

-bidders announce prices -not anonymous, each bidder can see who the other bidders are -auctioneers can set minimum increments -no upper limit on bids

GSP

-each advisor places a bid -bids are ranked -the k-th highest bidder pays the bid (when the user clicks) of the (k+1)th bidder -always at least 1 more bidder than number of links awarded -truthful bidding is not a dominant strategy

Dutch/descending price auction

-first price auction -there is a price clock: displays the price that is decreasing -auction stops as soon as someone yells "mine" -not a dominant strategy

Vickrey Auction

a sealed-bid auction where the highest bidder wins but pays the price bid by the next-highest bidder (second-price sealed bid auction) -truthful bidding dominant strategy

ticking price

amount by which the price has to go up or down (in japanese button auction not outcry or vickrey auction) -truthful bidding is the dominant strategy

why couls a bidder possibly over bid their valuation in a 3rd highest bid and vickrey auction

because in both vickrey and 3rd highest bid auctions you do not pay the highest bid so you could still end up paying below your valuation.

thin market

can cause price volatility or reducing competion ( thus less chance of finding the perfect deal)

payoff flows

click frequency per hour x surplus per click

private value

each bidder knows their valuation but dos not know the value of other bidders

why bid cents in ebay

ebay awards winner to who bid the highest valuation first, if you bid cents you will get ahead of those pays integers

Proxy bidding

in ebay- having a third party bidding for a bidder

Generalized english auction

rules: -clock showing current price -starting price = 0 -advertiser can drop at any time -auction over when the next-to-last advertiser drops out

first price auction

same as Vickrey though price paid by winner is the highest bid -not a dominnant stategy to bid truthfully

thick market

seller facing many buyers will have pretty good knowledge of what the demand looks like, same goes for the buyers

market thickness

the number of actors in the market

current bid

the price the winner will pay =second highest bid+increment

interdependent value

the values bidders attaches to the good, unknown to them, are related

Truthful Bidding

to bid their valuation (dominant strategy in Japanese button auction)

Revenue Equivalence Theorem

under certain assumptions, the four auction types are expected to raise the same revenues dutch= first price sealed bid auction japanese button auction= vickrey auction

Comparison between VCG and GSP

website revenue is higher with the GSP than with the VCG

when does the vickrey auction equal to VCG auction

when only one item is sold

Japanese Button Auction (english auction)

-price announced by auctioneer -for any proposed price, bidders have to say whether they accept or refuse (with the remote control) -as soon as bidder stops pressing the button they are inactive and no longer can participate in the auction -if bidders stop at the same price, winner chosen at random

VCG auction

-sale of several items -each bidder submits his bid function -the assignment is the one who maximizes the social value -each bidder pays the externality she imposes on the other bidders -externality=others max social value without bidder- others social value at optimal assignment -generalizes the Vickrey(second price) auction- bids are submitted simultaneously -strategy proof, bid ones true valuation

payoff

=valuation-price payed

reserve price

A minimum acceptable selling price in an auction.

keyword auction

One method in search engine marketing in which companies bid for words and pay the search engine a certain amount every time the word is searched and their listing is clicked on. -generalized second price auction -bidding truthfully is not a dominant strategy, then we try to characterize what stabilized equilibrium look like.

common value

all bidders have the same valuations but each bidders have a different estimation about what the actual value is