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  5. Expected Revenue from Open and Sealed Bid Auctions

Journal of Economic Perspectives

ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)

Expected Revenue from Open and Sealed Bid Auctions

  • John G. Riley
Journal of Economic Perspectives
vol. 3, no. 3, Summer 1989
(pp. 41–50)
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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.

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

JEL Classification

  • 022 Microeconomics--Theory of Auction Markets
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