Resumen de Auctions: theory and practice

Eyal Winter

• Auction Theory is one of the most mathematical elds of game theory and at the same time one of the most applied. I will survey the basic models and the most fundamental results of the eld and will devote much time to the practice of auctions. In particular I will talk about (1) FCC auctions in which cellular frequency bands have been auctioned out in the US, (2) Internet auctions, including the way Google is charging for sponsored links and (3) government procurements. I will distinguish between private value auctions (in which each bidder knows the value of the good for himself but is uninformed about the value of the rest) and common value auctions in which all bidders assign the same value to the good but this value is unknown. The "winner curse"which is a most common phenomenon in common value auctions will be discussed as well. In terms of auction mechanism I will discuss(1). The rst price sealed-bid mechanism (2). The second price sealed-bid (3). The English Auctions, (4) the Duch Auction and (5) the Japanese Auction.

  I will present the Vickery Theorem for 2nd price auctions and will give a three-line proof.

  I will state and will give the intuition for the main equivalence results in Auction theory In the second part of the talk I will discuss more advanced issues that are based on my own contributions. The rst among those is the issue of repeated auctions. Auctions that run repeatedly selling one item at a time often display the phenomenon of declining prices in time. I will show how this phenomenon can be explained by a standard game theoretic model. This discussion will be based on Kittsteiner, Nikitta and Winter (2004). A related topic is that of ow-auctions (like electricity auctions), where the sold good is a contract to supply the ow over a given period of time. I will discuss the optimal policy for the seller in terms of the length of contract. This discussion will be based on Kremer, Wiener and Winter (2008).

  Finally I will survey several important behavioral phenomena in auction environments.

  These will be based on experimental and empirical papers. These will include the following:

  1. Sniping in Internet auctions.

  2. Bidding wars.

  3. Underbidding in 2nd price auctions.

  My talk will start with a short experiment with the participation of the audience with which we will gain some insight on the practice of auctions.