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welcome and introduction. auctions: theory, evidence, policy. Peter Bardsley. this workshop. second in a series of workshops prepared by the University of Melbourne for the VPS part of an ongoing capacity building partnership level is intermediate

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welcome and introduction

welcome and introduction

auctions: theory, evidence, policy

Peter Bardsley

this workshop
this workshop
  • second in a series of workshops prepared by the University of Melbourne for the VPS
  • part of an ongoing capacity building partnership
  • level is intermediate
    • participation in previous workshop is desirable but not essential
    • we are aware that the audience is very mixed
    • if it starts to look complicated, hang in there – there will be something for everybody
the objectives
the objectives
  • to introduce and illustrate some of the basic ideas of auction theory
  • to show how these ideas can be tested, explored and refined in the laboratory
  • to show how these ideas are applied to policy design
  • to work in the simplest possible environment to illustrate these concepts
    • independent private values model
    • more complex environments (common values, asymmetric bidders, multiple objects, combinatorial and package auctions) will be mentioned briefly
buying or selling
buying or selling?
  • auctions can be used to sell something, or to buy something
    • procurement auctions, sometimes called reverse auctions
  • the theory is completely symmetrical
  • we will usually talk about selling objects
    • the application to procurement auctions is immediate: just change some words around
what do we want allocation mechanisms to achieve
what do we want allocation mechanisms to achieve?
  • match buyers and sellers
  • price discovery / terms of trade
  • efficient allocation of resources
    • voluntary exchange makes both parties better off
    • are their any gains from trade that are missed?
      • is there any money left lying on the table?
    • speed, efficiency, transparency, low transaction costs
  • maximal revenue, if we are selling; minimal cost, if we are buying
  • robustness: the mechanism should work well in a range of environments
a variety of mechanisms
a variety of mechanisms
  • beauty parades, negotiated deals
  • unstructured pit markets
    • village market
    • some stock exchanges
  • intermediated markets
    • intermediary holds inventory, bears risk, stands between buyer and seller
    • stock exchange specialists, supermarkets, used car dealers
  • posted price markets
    • most shops
    • Sydney versus Melbourne house market
  • search markets
    • haggling in bazaars
    • job markets (executives, plumbers, ...)
  • auctions of many forms
why study auctions
why study auctions?
  • wide range of design choices
  • tend to be highly efficient
  • well suited to situations with a single seller or a single buyer
  • can be shown to be optimal in many environments
first reactions
first reactions
  • what strategies did you follow when you were bidding?
    • what strategies do you think other people were following?
  • should you reveal your private information?
    • should you bid your full value?
    • can you rely on others being truthful?
  • which institutions are more profitable for the auctioneer?
how to get the most out of this workshop three key questions
how to get the most out of this workshop:three key questions
  • how does auction design affect behaviour?
    • how aggressively do participants bid?
  • how does auction design affect performance?
    • revenue raise
    • efficiency of allocation
  • when are apparently different institutions actually very similar?
    • when are apparently similar institutions actually very different?