Oliver Kirchkamp
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Auction Theory (Winter 2022/23)

In the module we explore quantitative and mathematical methods of economic theory. We develop a framework to analyse and design transparent and competitive mechanisms for allocating goods, services, or resources. Such a framework can help designing fair and efficient mechanisms for resource allocation and conservation. While we concentrate on the theoretical properties of these mechanisms, understanding these properties is necessary to understand environmental markets and trading, e.g. emissions trading systems or renewable energy certificate markets. The mechanisms could be used to encourage renewable energy deployment, to contribute to sustainable energy transitions, to manage resources in a sustainable way and to ensure fair access to resources.
Audience:
The lecture is targeted at advanced Master students.
Students should be familiar with Game Theory, Calculus and Probability.
Motivation:
Auctions belong to the oldest and perhaps most robust economic institutions. Today, auctions control the allocation of carbon emmissions, the provision and the distribution of green as well as not so green energy, transport services, communication licences, etc. Auctions help us to understand how prices for these and other goods are determined and how information is aggregated with the help of decentral institutions. For theorists and for experimental economists alike, auctions provide a crucial framework to study economic behaviour.
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.
Online-teaching:
The module will be offered online.

This is a course with a more technical topic. For this course the online format offers benefits for learning that we miss in a traditional lecture room. Online videos allow you to follow your own learning speed. You can (and you should) pause your video, slow down or fast forward according to your individual learning speed. Weekly online homeworks give you regular feedback and help you to engage with the material. Online discussions and exercises provide and enhance interaction.

As a result, the online format gives you a much better learning experience and more room to interact. For this course, students are clearly more successful with online teaching than students with traditional teaching. In the past, with traditional classroom teaching, about 25% of the students failed the course. Now, with on-line teaching, fewer than 5% of the students fail.

Lecture + Exercises:
Oliver Kirchkamp. During the term you will in each week obtain a new set of videos. You can choose when (and how) you watch these videos. These videos will remain available until the end of the term. I recommend to follow a routine: Watch the weekly videos on always the same day at always the same time. Each week you will also complete a small homework.
Weekly homework:
Each week you will submit a small homework (through Moodle). Although different students will work on different problems, it will be useful to discuss your homework in your study group. You should use the discussion board in Moodle to ask questions and to stay in touch with the other members of the course.

You can obtain 1/3 of the total points (140 points) with the homework. You can obtain 2/3 of the total points (280 points) in the exam on 09.02.2026, 10:30.

At the end of the term, you will find extra (optional) problem sets in Moodle. These problem sets are similar in style to the exam. If you want to improve your routine for the exam, you can try these problems as often as you like. However, these extra problems don't count for your grade.

Discussion board + Online Meeting:
Please use the discussion board in Moodle to ask questions and to discuss issues related to the lecture. I try to answer your questions as soon as possible, usually within one working day.

You find the access code for the online meeting Moodle. Before joining the meeting, you should have watched the videos and you should have made an attempt to solve the homework. Please come in time and, if possible, activate your camera. I don't plan to introduce new material in the discussion board or online meeting.

Exam:
  • You obtain up to 1/3 of the total points (140 points) in the weekly homework.
  • You obtain up to 2/3 of the total points (280 points) in the exam on 09.02.2026, 10:30, . The style of the questions in the take home exam on 09.02.2026, 10:30, will be similar to the questions in the weekly homework.

    The sum of the points (up to 420 points) determines your grade. I assume that, pursuant to the »Prüfungsordnung«, the weekly homework and the take home exam constitute a single partial exam.

  • Date: 09.02.2026, 10:30 (online). You can write the exam at home — provided you have a good connection to the internet. If you prefer to write at the FSU Jena, please let me know.
  • Instructions for the exam
  • If you want to obtain credits for the course, please do not forget to register for the exam!
  • Preparing for the exam: During the term you should solve the problems from the weekly homework. During the last weeks of the term, you will find in Moodle “extra questions”. This is a quiz, similar in style to the exam, that you can take as often as you want. Each time you take this quiz you get a new collection of problems. When you submit these extra questions exam, you will get immediate feedback. You can work on these extra questions to get more routine for your exam. Points scored in this quiz don't contribute to your final grade.
Prerequisites:
Game theory (e.g. as covered in BW24.2), Calculus, Probability.
Literature:
  • Krishna, Vijay, 2002. Auction Theory, Academic Press (this is the main text for this course).
  • 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.
  • 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:
TopicLectureExercise
1. Introduction.13.10.202520.10.2025
2. Terminology and definitions.20.10.202527.10.2025
3. Equilibrium concepts.27.10.202503.11.2025
4. Symmetric private values.03.11.202510.11.2025
5. Revision: Random variables.10.11.202517.11.2025
6. Revision: Jointly distributed random variables.17.11.202524.11.2025
7. Order Statistics.24.11.202501.12.2025
8. Bidding equilibria in the first-price auction.01.12.202508.12.2025
9. Reserve prices.08.12.202515.12.2025
10. Entry fees.15.12.202505.01.2026
11. Revenue equivalence.05.01.202612.01.2026
12. Risk aversion.12.01.202619.01.2026
13. Interdependent values.19.01.202626.01.2026
14. Summary, exercises, discussion board.26.01.202602.02.2026
15. Summary, exercises, discussion board, Q+A.02.02.202609.02.2026
FAQ:
Please send feedback and questions to oliver.kirchkamp@uni-jena.de.
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(c)Oliver Kirchkamp