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Journal of Economic Perspectives: Vol. 3 No. 3 (Summer 1989)

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Expected Revenue from Open and Sealed Bid Auctions

Article Citation

Riley, John G. 1989. "Expected Revenue from Open and Sealed Bid Auctions." Journal of Economic Perspectives, 3(3): 41-50.

DOI: 10.1257/jep.3.3.41

Abstract

The first objective of this paper has been to explain why it is that expected seller revenue is the same under very different auction rules. The second objective has been to explain why revenue equivalence no longer holds once the central assumptions of risk aversion and independence of beliefs are modified. The effect of risk aversion is to make a sealed high bid auction more attractive from a seller's viewpoint. The effect of correlated beliefs is to favor open bidding. Which of the two factors dominates under plausible assumptions about risk aversion parameters and about the degree to which beliefs are correlated remains an important open question.

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Authors

Riley, John G. (UCLA)

JEL Classifications

022: Microeconomics--Theory of Auction Markets

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