This paper provides an elementary, non-technical, survey of auction theory, by introducing and describing some of the critical papers in the subject. (The most important of these are reproduced in a companion book, The Economic Theory of Auctions, Paul Klemperer (ed.), Edward Elgar (pub.), forthcoming.) We begin with the most fundamental concepts, and then introduce the basic analysis of optimal auctions, the revenue equivalence theorem, and marginal revenues. Subsequent sections address risk-aversion, affiliation, asymmetries, entry, collusion, multi-unit auctions, double auctions, royalties, incentive contracts, and other topics. Appendices contain technical details, some simple worked examples, and a bibliography for each section.

The copyright to this article is held by the Econometric Society,

Generalized Vickrey mechanisms have received wide attention in the literature because they are efficient and strategyproof, i.e. truthful bidding is optimal whatever the bids of other agents. However it is well-known that it is impossible for an exchange, with multiple buyers and sellers, to be efficient and budget-balanced, even putting strategy-proofness to one side. A market-maker in an efficient exchange must make more payments than it collects. We enforce budget-balance as a hard constraint, and explore payment rules to distribute surplus after an exchange clears to minimize distance to Vickrey payments. Different rules lead to different levels of truthrevelation and efficiency. Experimental and theoretical analysis suggest a simple Threshold scheme, which gives surplus to agents with payments further than a certain threshold value from their Vickrey payments. The scheme appears able to exploit agent uncertainty about bids from other agents to reduce manipulation and boost allocative efficiency in comparison with other simple rules.

Abstract not found

Abstract not found

Abstract not found

This paper analyzes individually-rational ex post equilibrium in the VC (Vickrey-Clarke) combinatorial auctions. If \Sigma is a family of bundles of goods, the organizer may restrict the participants by requiring them to submit their bids only for bundles in \Sigma. The \Sigma-VC combinatorial auctions (multi-good auctions) obtained in this way are known to be individually-rational truthtelling mechanisms. In contrast, this paper deals with non-restricted VC auctions, in which the buyers restrict themselves to bids on bundles in \Sigma, because it is rational for them to do so. That is, it may be that when the buyers report their valuation of the bundles in \Sigma, they are in an equilibrium. We fully characterize those \Sigma that induce individually rational equilibrium in every VC auction, and we refer to the associated equilibrium as a bundling equilibrium. The number of bundles in \Sigma represents the communication complexity of the equilibrium. A special case of bundling equilibrium is partition-based equilibrium, in which \Sigma is a field, that is, it is generated by a partition. We analyze the tradeoff between communication complexity and economic efficiency of bundling equilibrium, focusing in particular on partition-based equilibrium.

this paper: What partnerships can be dissolved efficiently? At first glance, one might think that the set of dissolvable partnerships is empty; that is, the incomplete information about valuations necessarily leads to some inefficiency in trade. This is not the case. The following theorem gives a necessary and sufficient condition for the existence of an efficient trading mechanism. THEOREM 1: A partnership with ownership rights r and valuations independently drawn from F can be dissolved efficiently if and only if (D)

Abstract not found

Abstract not found