Friday, Jan. 4, 2019 10:15 AM - 12:15 PM
- Chair: Jesse Schwartz, Kennesaw State University
Destructive Bidding in Common-Valuation, All-Pay Auctions and Lotteries
AbstractIn the classic first-price all-pay auction, bidders compete for a common-value prize and every bidder pays her bid. This paper considers the case in which losing bids are paid and additionally asymmetrically reduce the value of the prize for the winning bidder. This set-up provides a better fit for some political contests and military conflicts as well as having applications to lobbying and R&D races. We first solve for the n-player, symmetric, mixed-strategy symmetric equilibrium to the auction and compare the results to the standard all-pay auction model. We then further generalize the model into a two round game in which a first round destructive investment is made followed by an all-pay lottery. Risk-aversion of contestants and effectiveness of the investment are shown to have a non-monotonic effect on the size of the destructive investment.
Getting More by Asking for Less?
AbstractIn auctions, a seller may strategically set a low ask price in an attempt to trigger more interest. More interest would increase the probability of multiple high bids and a bidding war. Does such a strategy actually work? We study a combination of data sets on repeat-sales, repeat-sellers, repeat-bids, and repeat-realtors sourced from Norwegian housing transactions, realtors' bid-logs, and official registers of ownership. More than fifty percent of the sellers offer an ask price that is below the estimated market value. Our results suggest that this is sub-optimal. A lower ask price leads to more bids, which in itself contributes to a higher sell price. However, a lower ask price price also anchors the opening bid in the auction, which has a negative impact on the sell price. We find that the anchoring effect dominates the increased-interest effect trigger by a lower ask price. It does, however, appear to imply a higher sell-ask spread -- a sales pitch for the real estate agent. We find that high-performing realtors recommend different ask price strategies than low-performing realtors. High-performing realtors tend not to be associated with transactions in which strategic ask prices have been used. Low-performing realtors, however, tend to be associated with such transactions. Moreover, a time-series regression among low-performing realtors shows that when a realtor in one year tends to use strategic ask prices, this realtor sees more business the next year. For high-performing realtors, there is no such association. Finally, we find that sellers who previously failed on the strategy of a low ask price learn that this is sub-optimal, and in consequence are less likely to offer a discount the next time they sell.
Purchasing Seats for High School Admission in China
AbstractFor more than 15 years, many Chinese cities gave students the option of paying higher tuition to acquire seats in their preferred schools. Yet real-world matching mechanisms that include an option to purchase seats may yield inefficient and unstable matching outcomes. This paper combines high school admission and survey data from China to estimate students' preferences regarding schools and tuition. The counterfactual experiments indicate that when the number of seats for sell is limited, the change from the deferred acceptance mechanism to the existing matching mechanism (with the seat-purchasing option) may have benefited moderately performing students while reducing the welfare of top students. Meanwhile, the upper-tier schools may benefit from the increase in tuition collection and no significant decline in student quality, but middle-tier schools face a significant trade-off between student quality and tuition. If the deferred acceptance mechanism is instead replaced by a strategy-proof ``student optimal purchasing seats'' mechanism, then all student groups would experience a loss of welfare. At the same time, schools under the latter mechanism would collect significantly more tuition with only minimal change in the quality of admitted students.
Simultaneous Deferred Acceptance Auctions with Multiple Relinquishment Options
AbstractRemarkable progresses in mobile broadband technology have led to wide adoption of mobile communication devices that rely on extensive uses of spectrum. A recent prominent example of the spectrum reallocation policy is “incentive auctions” that repurpose spectrum by encouraging licensees to relinquish spectrum usage rights in exchange for a share of the proceeds from an auction of new licenses to use the repurposed spectrum. This paper studies the design of reverse auctions in the US incentive auctions where TV broadcasters in the UHF band offer to relinquish the usage right or to relocate to another band to increase the spectrum for mobile communication uses.
The state of the art is the deferred-acceptance auctions by [Milgrom and Segal2015] that determine allocations based on scores and are strategy-proof when sellers are single-minded. But when sellers have multiple relinquishment options and are restricted to be single-minded, there would be possibilities of strategic considerations about which option the seller should bid. Nevertheless just allowing multiple bids is not possible since a seller switching one option to another may violate interference constraints.
Then the novel idea of the paper is to facilitate relinquishment of licenses by allowing licensees to make multiple offers, conducting threshold auctions for each option, and then assigning a licensee to an option with the highest profits. This idea is different from previous literature on greedy actions for single-minded bidders because this idea allows sellers to be interested in not just one option but also other options.
The mechanisms are strategy-proof. Technically, this result generalizes the previous strategy-proofness results of [Milgrom and Segal 2015] to multi-minded bidders. Furthermore, the mechanism can be implemented as clock auctions, making the mechanism practical. Furthermore, the mechanism allows more aggressive competition among TV broadcasters by allowing to compete in multiple relinquishment options, reducing the cost of spectrum acquisition.
- D4 - Market Structure, Pricing, and Design