Skip to main content
SpringerLink
Log in

Going, Going, Gone! A Swift Tour of Auction Theory and its Applications

  • Published:
De Economist Aims and scope Submit manuscript

An Erratum to this article was published on 06 September 2006

An Erratum to this article was published on 06 September 2006

Abstract

This paper provides a swift tour of auction theory and its applications. Among the questions it considers are: How much do bidders bid in commonly studied single-object auctions? How efficient are these auctions? How much revenue do they generate? Which single-object auction maximizes the seller’s expected revenue? What is the best way to auction incentive contracts? And, how efficient and complex are multi-object auctions?

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Arrow K.J., Debreu G. (1954), ‘Existence of an Equilibrium for a Competitive Economy’. Econometrica 22, 265–290

    Article  Google Scholar 

  • Ashenfelter O. (1989), ‘How Auctions Work for Wine and Art’. Journal of Economic Perspectives 3, 23–36

    Google Scholar 

  • Ashenfelter O., Graddy K.(2002), Art Auctions: A Survey of Empirical Studies, NBER working paper nr. 8997, Cambridge, MA.

  • Ausubel L.M. (2004), ‘An Efficient Ascending-Bid Auction for Multiple Objects’. American Economic Review 94, 1452–1475

    Article  Google Scholar 

  • Ausubel L.M., Cramton P. (2002), Demand Reduction and Inefficiency in Multi-Unit Auctions. University of Maryland, mimeo

    Google Scholar 

  • Ausubel L.M., Cramton P. (2004), ‘Auctioning Many Divisible Goods’. Journal of the European Economic Association 2, 480–493

    Article  Google Scholar 

  • Ausubel L.M., Cramton P., Milgrom P. (2006), ‘The Clock-Proxy Auction: A Practical Combinatorial Auction Design’. In: Cramton P., Shoham Y., Steinberg R. (eds). Combinatorial Auctions. MIT Press, Cambridge, MA, pp. 115–138

    Google Scholar 

  • Ausubel, L.M. and P.R. Milgrom (2002), ‘Ascending Auctions with Package Bidding,’ Frontiers of Theoretical Economics, 1(1), Article 1, 1–42.

  • Baye M.R., Kovenock D., de Vries C.G. (1993), ‘Rigging the Lobbying Process: An Application of the All-Pay Auction’. American Economic Review 83, 289–294

    Google Scholar 

  • Baye M.R., Kovenock D., de Vries C.G. (1996), ‘The All-Pay Auction with Complete Information’. Economic Theory 8, 291–305

    Google Scholar 

  • Berg G.J., van den J.C., van Ours, Pradhan M.P. (2001), ‘The Declining Price Anomaly in Dutch Rose Auctions’. American Economic Review 91, 1055–1062

    Article  Google Scholar 

  • Binmore K., Klemperer P. (2002), ‘The Biggest Auction Ever: the Sale of the British 3G Telecom Licences’. Economic Journal 112, C74–C96

    Article  Google Scholar 

  • Binmore K., Swierzbinski J. (2000), ‘Treasury Auctions: Uniform or Discriminatory?’. Review of Economic Design 5, 387–410

    Article  Google Scholar 

  • Bulow J.I., Klemperer P.D. (1999), ‘The Generalized War of Attrition’. American Economic Review 89, 175–189

    Article  Google Scholar 

  • Bulow J.I., Roberts J. (1989), ‘The Simple Economics of Optimal Auctions’. Journal of Political Economy 97, 1060–1090

    Article  Google Scholar 

  • Cassady R. (1967), Auctions and Auctioneering. University of California Press, Berkeley/Los Angeles

    Google Scholar 

  • Che Y.-K., Gale I.L. (1998a), ‘Caps on Political Lobbying’. American Economic Review 88, 643–651

    Google Scholar 

  • Che Y.-K., Gale I.L. (1998b), ‘Standard Auctions with Financially Constrained Bidders’. Review of Economic Studies 65, 1–21

    Article  Google Scholar 

  • Clarke E.H. (1971), ‘Multipart Pricing of Public Goods’. Public Choice 11, 17–33

    Article  Google Scholar 

  • Cramton P. (1998), ‘The Efficiency of the FCC Spectrum Auctions’. Journal of Law and Economics 41, 727–736

    Article  Google Scholar 

  • Van Damme E. (1999). ‘The Dutch DCS-1800 Auction’. In: Patrone F., García-Jurado I., Tijs S. (eds). Game Practice: Contributions from Applied Game Theory. Kluwer Academic Publishers, Boston, pp. 53–73

    Google Scholar 

  • Van Damme E. (2002), ‘The European UMTS-Auctions’. European Economic Review 46, 846–869

    Article  Google Scholar 

  • Das Varma G. (2002), ‘Standard Auctions with Identity Dependent Externalities’. RAND Journal of Economics 33, 689–708

    Article  Google Scholar 

  • Day R.W., Raghavan S. (2005), Fair Payments for Efficient Allocations in Public Sector Combinatorial Auctions. University of Maryland, mimeo

    Google Scholar 

  • Demange G., Gale D., Sotomayor M. (1986), ‘Multi-Item Auctions’. Journal of Political Economy 94, 863–872

    Article  Google Scholar 

  • Demsetz H. (1968), ‘Why Regulate Utilities?’. Journal of Law and Economics 11, 55–66

    Article  Google Scholar 

  • Dykstra M.J., van der Windt N. (2004). ‘Beauty Contest Design’. In: Janssen M.C.W. (eds). Auctioning Public Assets: Analysis and Alternatives. Cambridge University Press, Cambridge, UK

    Google Scholar 

  • Engelbrecht-Wiggans R., Kahn C.M. (1998a), ‘Multi-Unit Auctions with Uniform Prices’. Economic Theory 12, 227–258

    Article  Google Scholar 

  • Engelbrecht-Wiggans R., Kahn C.M. (1998b), ‘Multi-Unit Pay-Your-Bid Auctions with Variable Rewards’. Games and Economic Behavior 23, 25–42

    Article  Google Scholar 

  • Englmaier, F., P. Guillén, L. Llorente, S. Onderstal and R. Sausgruber (2004), The Chopstick Auction: A Study of the Exposure Problem in Multi-Unit Auctions, FEEM working paper 10.2004, Milan.

  • Gilbert R., Newbery D. (1982), ‘Preemptive Patenting and the Persistence of Monopoly’. American Economic Review 72, 514–526

    Google Scholar 

  • Goeree J.K., Offerman T. (2003), ‘Competitive Bidding in Auctions with Private and Common Values’. Economic Journal 113, 598–614

    Article  Google Scholar 

  • Goeree J.K., Maasland E., Onderstal S., Turner J. (2005), ‘How (Not) to Raise Money’. Journal of Political Economy 113, 897–918

    Article  Google Scholar 

  • Goeree J.K., Offerman T., Schram A. (2006), ‘Using First-Price Auctions to Sell Heterogeneous Licenses’. International Journal of Industrial Organization 24, 555–581

    Article  Google Scholar 

  • Grimm V., Riedel F., Wolfstetter E. (2005), ‘Low Price Equilibrium in Multi-Unit Auctions: The GSM Spectrum Auction in Germany’. International Journal of Industrial Organization 21, 1557–1569

    Article  Google Scholar 

  • Groves T. (1973), ‘Incentives in Teams’. Econometrica 41, 617–631

    Article  Google Scholar 

  • Haan M., Toolsema-Veldman L. (2005), License Auctions when Winning Bids are Financed through Debt. University of Groningen, mimeo

    Google Scholar 

  • Harris M., Raviv A. (1981), ‘Allocation Mechanisms and the Design of Auctions’. Econometrica 49, 1477–1499

    Article  Google Scholar 

  • Harstad R.M. (2000), ‘Dominant Strategy Adoption, Efficiency, and Bidders’ Experience with Pricing Rules’. Experimental Economics 3, 261–280

    Google Scholar 

  • Hoffman K., Menon D., van den Heever S., Wilson T. (2006), ‘Observations and Near-Direct Implementations of the Ascending Proxy Auction’. In: Cramton P., Shoham Y., Steinberg R. (eds). Combinatorial Auctions. MIT Press, Cambridge, MA, pp. 415–450

    Google Scholar 

  • Janssen M.C.W. (2006), ‘Auctions as Coordination Devices’. European Economic Review 50, 517–532

    Article  Google Scholar 

  • Janssen, M.C.W. and V.A. Karamychev (2005), Auctions, Market Prices and the Risk Attitude Effect, Tinbergen Institute discussion paper 2005-025/1.

  • Janssen, M.C.W. and E. Maasland (2002), ‘Second Opinion Onderzoek naar de Veiling van Telefoonnummers’ (‘Second Opinion Research on the Auction of Telephone Numbers’), consultancy report, SEOR-ECRi, available at www.ecri.nl.

  • Jehiel, P. and B. Moldovanu (2001), The European UMTS/IMT-2000 License Auctions, CEPR discussion paper 2810.

  • Jehiel P., Moldovanu B., Stacchetti E. (1999), ‘Multidimensional Mechanism Design for Auctions with Externalities’. Journal of Economic Theory 85, 258–294

    Article  Google Scholar 

  • Julien B., Kennes J., King I. (2000), ‘Bidding for Labor’. Review of Economic Dynamics 3, 619–649

    Article  Google Scholar 

  • Kagel J.H. (1995), ‘Auctions: A Survey of Experimental Research’. In: Kagel J.H., Roth A.E. (eds). The Handbook of Experimental Economics. Princeton University Press, Princeton, NJ, pp. 501–585

    Google Scholar 

  • Kagel J.H., Harstad R.M., Levin D. (1987), ‘Information Impact and Allocation Rules in Auctions with Affiliated Private Values: A Laboratory Study’. Econometrica 55, 1275–1304

    Article  Google Scholar 

  • Kagel J.H., Levin D. (1993), ‘Independent Private Value Auctions: Bidder Behavior in First-, Second- and Third-Price Auctions with Varying Numbers of Bidders’. The Economic Journal 103, 868–879

    Article  Google Scholar 

  • Klemperer P. (1998), ‘Auctions with Almost Common Values: The “Wallet Game” and Its Applications’. European Economic Review 42, 757–769

    Article  Google Scholar 

  • Klemperer P. (1999), ‘Auction Theory: A Guide to the Literature’. Journal of Economic Surveys 13, 227–286

    Article  Google Scholar 

  • Klemperer P. (2002), ‘What Really Matters in Auction Design’. Journal of Economic Perspectives 16, 169–190

    Article  Google Scholar 

  • Klemperer P. (2003). ‘Why Every Economist Should Learn Some Auction Theory’. In: Dewatripont M., Hansen L., Turnovksy S. (eds). Advances in Economics and Econometrics: Invited Lectures to Eighth World Congress of the Econometric Society (2000). Cambridge University Press, Cambridge, UK, pp. 25–55

    Google Scholar 

  • Klemperer P. (2004), Auctions: Theory and Practice. Princeton University Press, Princeton, NJ

    Google Scholar 

  • Krishna V. (2002), Auction Theory. Academic Press, San Diego

    Google Scholar 

  • Laffont J.-J. (1997), ‘Game Theory and Empirical Economics: The Case of Auction Data’. European Economic Review 41, 1–35

    Article  Google Scholar 

  • Laffont J.-J., Robert J. (1996), ‘Optimal Auction with Financially Constrained Buyers’. Economics Letters 52, 181–186

    Article  Google Scholar 

  • Laffont J.-J., Tirole J. (1987), ‘Auctioning Incentive Contracts’. Journal of Political Economy 95, 921–937

    Article  Google Scholar 

  • Laffont J.-J., Tirole J. (1993), A Theory of Incentives in Procurement and Regulation. MIT Press, Cambridge, MA

    Google Scholar 

  • Leonard H. (1983), ‘Elicitation of Honest Preferences for the Assignment of Individuals to Positions’. Journal of Political Economy 91, 461–479

    Article  Google Scholar 

  • Littlechild S. (2002), ‘Competitive Bidding for a Long-term Electricity Distribution Contract’. Review of Network Economics 1, 1–39

    Article  Google Scholar 

  • Lusht K. (1994), ‘Order and Price in a Sequential Auction’. Journal of Real Estate Finance and Economics 8, 259–266

    Article  Google Scholar 

  • Maasland E., Moldovanu B. (2004). ‘An Analysis of the European 3G Licensing Process’. In: Janssen M.C.W. (eds). Auctioning Public Assets: Analysis and Alternatives. Cambridge University Press, Cambridge, UK

    Google Scholar 

  • Maasland, E. and S. Onderstal (2006), ‘Auctions with Financial Externalities’, Economic Theory, forthcoming.

  • Maskin E.S., Riley J.G. (1984), ‘Optimal Auctions with Risk Averse Buyers’. Econometrica 52, 1473–1518

    Article  Google Scholar 

  • Maskin E.S., Riley J.G. (1989). ‘Optimal Multi-Unit Auctions’. In: Hahn F. (eds). The Economics of Missing Markets, Information, and Games. Oxford University Press, New York, pp. 312–335

    Google Scholar 

  • Maskin E.S., Riley J.G. (2000), ‘Asymmetric Auctions’. Review of Economic Studies 67, 413–438

    Article  Google Scholar 

  • Matthews S. (1983), ‘Selling to Risk Averse Buyers with Unobservable Tastes’. Journal of Economic Theory 30, 370–400

    Article  Google Scholar 

  • Maynard Smith J. (1974), ‘The Theory of Games and the Evolution of Animal Conflicts’. Journal of Theoretical Biology 47, 209–221

    Article  Google Scholar 

  • McAfee R.P., McMillan J. (1986), ‘Bidding for Contracts’. RAND Journal of Economics 17, 326–338

    Article  Google Scholar 

  • McAfee R.P., McMillan J. (1987a), ‘Auctions and Bidding’. Journal of Economic Literature 25, 699–738

    Google Scholar 

  • McAfee R.P., McMillan J. (1987b), ‘Competition for Agency Contracts’. RAND Journal of Economics 18, 296–307

    Article  Google Scholar 

  • McMillan J. (1994), ‘Selling Spectrum Rights’. Journal of Economic Perspectives 8, 145–162

    Google Scholar 

  • Menezes F. (2003), ‘An Auction Theoretical Approach to Fiscal Wars’. Social Choice and Welfare 20, 155–166

    Article  Google Scholar 

  • Milgrom P.R. (2004), Putting Auction Theory to Work. Cambridge University Press, Cambridge, UK

    Google Scholar 

  • Milgrom P.R., Weber R.J. (1982), ‘A Theory of Auctions and Competitive Bidding’. Econometrica 50, 1089–1122

    Article  Google Scholar 

  • Mirrlees J.A. (1971), ‘An Exploration in the Theory of Optimal Income Taxation’. Review of Economic Studies 38, 175–208

    Article  Google Scholar 

  • Mirrlees J.A. (1975). The Theory of Moral Hazard and Unobservable Behaviour: Part I, Oxford University, mimeo

    Google Scholar 

  • Mirrlees J.A. (1976), ‘The Optimal Structure of Incentives and Authority within an Organization’. Bell Journal of Economics 7, 105–131

    Article  Google Scholar 

  • Mirrlees J.A. (1999), ‘The Theory of Moral Hazard and Unobservable Behaviour: Part I’. Review of Economic Studies 66, 3–21

    Article  Google Scholar 

  • Moldovanu B., Sela A. (2001), ‘The Optimal Allocation of Prizes in Contests’. American Economic Review 91, 542–558

    Article  Google Scholar 

  • Myerson R.B. (1981), ‘Optimal Auction Design’. Mathematics of Operations Research 6, 58–73

    Article  Google Scholar 

  • Noussair C. (1995), ‘Equilibria in a Multi-Object Uniform Price Sealed Bid Auction with Multi-Unit Demands’. Economic Theory 5, 337–351

    Article  Google Scholar 

  • OECD (2001), ‘Innovations in Labour Market Policies: The Australian Way,’ Policy report, Paris, France.

  • Offerman T., Potters J. (2005), Does Auctioning of Entry Licenses Induce Collusion? An Experimental Study. University of Amsterdam and Tilburg University, mimeo

    Google Scholar 

  • Onderstal, S. (2002a), Socially Optimal Mechanisms, CentER discussion paper nr. 34, Tilburg University.

  • Onderstal, S. (2002b), The Chopstick Auction, CentER discussion paper nr. 35, Tilburg University.

  • Onderstal S. (2005), Bidding for the Unemployed: An Application of Mechanism Design to Welfare-to-Work Programs. University of Amsterdam, mimeo

    Google Scholar 

  • Pezanis-Christou, P. (2001), Sequential Auctions with Asymmetric Buyers: Evidence from a Fish Market, IAE-UAB working paper nr. 558.03, Bonn University.

  • Pipes, D. (1998-1999), ‘Herodotus: Father of History, Father of Lies,’ Loyola University New Orleans: The Student Historical Journal, 30.

  • Posner R.A. (1975), ‘The Social Costs of Monopoly and Regulation’. Journal of Political Economy 83, 807–828

    Article  Google Scholar 

  • Riley J.G., Samuelson W.F. (1981), ‘Optimal Auctions’. American Economic Review 71, 381–392

    Google Scholar 

  • Robinson M. (1985), ‘Collusion and the Choice of Auction’. RAND Journal of Economics 16, 141–145

    Article  Google Scholar 

  • Rothkopf M.H., Teisberg T.J., Kahn E.P. (1990), ‘Why Are Vickrey Auctions Rare?’. Journal of Political Economy 98, 94–109

    Article  Google Scholar 

  • SEO and TNO (2004), ‘Buitenlandse Ervaringen met de Aanbesteding van Reïntegratie-diensten’ (‘Foreign Experiences with Tendering Reintegration Services’), consultancy report, Amsterdam, the Netherlands.

  • Shubik M. (1983). ‘Auctions, Bidding, and Markets: An Historic Sketch’. In: Engelbrecht-Wiggans R., Shubik M., Stark J. (eds). Auctions, Bidding, and Contracting. NewYork University Press, New York, pp. 33–52

    Google Scholar 

  • Staatscourant (2004), ‘Regeling Veiling procedure en Loting procedure Nummers’ (‘Ruling on the Rules for Conduct of the Auction and Lottery for the Award of Phone Numbers’), Staatscourant 172, 8 September 2004, p. 21.

  • Swinkels J. (1999), ‘Asymptotic Efficiency for Discriminatory Private Value Auctions’. Review of Economic Studies 66, 509–528

    Article  Google Scholar 

  • Tullock G. (1967), ‘The Welfare Costs of Tariffs, Monopolies, and Theft’. Western Economic Journal 5, 224–232

    Google Scholar 

  • Tullock G. (1980). ‘Efficient Rent-Seeking’. In: Buchanan J.M., Tollison R.D., Tullock G. (eds). Towards a Theory of the Rent-Seeking Society. Texas A&M University Press, College Station, pp. 97–112

    Google Scholar 

  • Verberne, M.L. (2000), Verdeling van het Spectrum (Allocation of Spectrum), Ph.D. thesis, University of Amsterdam.

  • Vickrey W. (1961), ‘Counterspeculation, Auctions, and Competitive Sealed Tenders’. Journal of Finance 16, 8–37

    Article  Google Scholar 

  • Vickrey, W. (1962), ‘Auction and Bidding Games,’ in: Recent Advances in Game Theory, Princeton University Conference, 15–29.

  • Vries S., de, Vohra R.V. (2003), ‘Combinatorial Auctions: A Survey’. INFORMS Journal on Computing 15, 284–309

    Article  Google Scholar 

  • Weber R.J. (1983). ‘Multiple-Object Auctions’. In: Engelbrecht-Wiggans R., Shubik M., Stark R.M. (eds). Auctions, Bidding, and Contracting: Uses and Theory. New York University Press, New York, pp. 165–191

    Google Scholar 

  • Weber R.J. (1997), ‘Making More from Less: Strategic Demand Reduction in the FCC Spectrum Auctions’. Journal of Economics and Management Strategy 6, 529–548

    Article  Google Scholar 

  • Wurman, P.R., J. Zhong and G. Cai (2005), ‘Computing Price Trajectories in Combinatorial Auctions with Proxy Bidding,’ Electronic Commerce Research and Applications, forthcoming.

  • Zheng C. (2001), ‘High Bids and Broke Winners’. Journal of Economic Theory 100, 129–171

    Article  Google Scholar 

  • Zulehner C. (2005), Strategic Behavior of Asymmetric Bidders in Sequential Auctions: Evidence from Austrian Cattle Auction. University of Vienna, mimeo

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Erasmus University Rotterdam, P.O. Box 1738, 3000 DR, Rotterdam, The Netherlands

    Emiel Maasland

  2. University of Amsterdam, Roetersstraat 11, 1018 WB, Amsterdam, The Netherlands

    Sander Onderstal

Authors
  1. Emiel Maasland
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Sander Onderstal
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Emiel Maasland.

Additional information

Onderstal gratefully acknowledges financial support from the Dutch National Science Foundation (NWO-VICI 453.03.606).

We thank Bastiaan Overvest, Marta Stryszowska and two anonymous referees for their helpful comments.

An erratum to this article can be found at http://dx.doi.org/10.1007/s10645-006-9025-y

Rights and permissions

Reprints and permissions

About this article

Cite this article

Maasland, E., Onderstal, S. Going, Going, Gone! A Swift Tour of Auction Theory and its Applications. De Economist 154, 197–249 (2006). https://doi.org/10.1007/s10645-006-9002-5

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10645-006-9002-5

Keywords

Search

Navigation