MW24.5 - Lecture Quantitative Economics III (2012/13) - Master Program in Economics

There are many interesting topics in quantitative economics. This term we will have a look at auctions. This lecture is equivalent to Auction theory for students who do a Diploma in Economics.

Lecture:

Tue., 8:15-9:45, Carl Zeiss Str. 3, SR 120 [Friedolin]

Exam

Tue., 26.2., 10:30-11:30, Universitätshauptgebäude, Fürstengraben 1, HS144

Questions that reached me after the last lecture:

• Q: How do I calculate the probablity to win in a first-price auction (e.g. in question 2.d of exam 2009)?

  A: Please have a look at section 2.3 in Krishna's book, in particular the derivation of equation (2.2).

• Q: Why is f(x)=√x not a density function for x∈[0,1]? Why is F(x)=2/3 √x not a distribution function for x∈[0,1]?

  A: Try, if necessary to calculate the matching distribution function and check the conditions (see Krishna, Appendix A).

• This lecture will be given in English.
• Some knowledge of game theory and some basic knowledge of probabilities may help.
• Audience: The lecture is primarily targeted at graduate and at advanced Master students.
• Motivation:
  Auctions belong to the oldest and perhaps most robust economic institutions. Auctions help us to understand how prices are reached and how information is aggregated with the help of decentral institutions.
• Topics: Standard types of auctions, efficiency and revenue in the case of private values, risk aversion, experimental evidence, auctions with interdependent valuations, winner's curse, common values, experimental evidence, affiliated values, uncertainty over the number of bidders, multiple units, combinatorial auctions.
• Literature:
  • Cassidy R., 1967. Auctions and Auctioneering, Berkeley: University of California press.
  • Kagel, J. H., 1995. Auctions: A Survey of Experimental Research, in The Handbook of Experimental Economics, J. H. Kagel and A. E. Roth (eds). Princeton: Princeton University Press.
  • Kagel, J. H. and D. Levin, 2002. Bidding in Common Value Auctions: A Survey of Experimental Research, in Common-Value Auctions and the Winner's Curse, Princeton University Press.
  • Vijay Krishna, 2002. Auction Theory, Academic Press (this is the main text for this course).
  • Klemperer P., (Ed.), 2000. The Economic Theory of Auctions, Edward Elgar Publishing.
  • Klemperer, P., 1999. Auction Theory: A guide to the Literature, Journal of Economic Surveys, 13: 227-260. CEPR
  • Klemperer, P., 2000. Why every economist should learn some auction theory. invited paper from the Econometric Society World Congress. CEPR
  • McAfee, R.P., and J. McMillan, 1987. "Auctions and Bidding," Journal of Economic Literature, 25:699-738. Jstor
  • Wilson, R., 1992. "Strategic Analysis of Auctions," in R.J. Aumann and S. Hart, Handbook of Game Theory with Economic Applications, Vol. 1. Amsterdam: Elsevier Science Publishers.Paper
• Outline:
  • Introduction
    • Mechanisms in general
    • History
    • Auctions today
    • Valuations
    • Equivalence among auctions
    • Aims when choosing an auction format
  • Symmetric private values
    • Second price auctions
    • Digression: Some game theory
    • First price auctions
  • Digression: Random variables
    • Random variables
    • Hazard Rates
    • Joint distributions
    • Dominance
    • Order statistics
  • First price auctions (bids, revenue, and risk)
  • Reserve prices
  • Revenue equivalence
  • Using the revenue equivalence principle
  • Risk aversion
  • Interdependent values
• Past exams
• Please send feedback and questions to lehre@kirchkamp.de.