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Auction Theory (Winter 2022/23)

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. Auctions help us to understand how prices are reached and how information is aggregated with the help of decentral institutions. Auctions have also been very well research by experimental economists.
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.
Online teaching:
The module will be offered online. Lectures are provided as videos. Weekly homeworks are provided in moodle. Exercises will start online.
  • In this field, online teaching is more effective than traditional teaching. In a traditional lecture large groups of students sit far away from the blackboard. Students in such a classroom who find the professor's monologue too fast can only try to copy the entire monologue and hope to understand later. Student who find the monologue too slow need patience. This is not an environment for an inspired discussion.

    Online videos allow you to follow your own learning speed. You can slow down the playback or fast forward according to your own preferences. Weekly online homeworks encourage you to actively engage with the material and provide regular feedback. A discussion board and exercises allows you interact with a teacher and with other students after you had a chance to understand the material.

    As a result, students learn better if we support them with online teaching. Students are clearly more successful in the exam than students with traditional teaching. With on-site teaching about 25% of the students failed the exam. With on-line teaching fewer than 5% fail.

  • I do care about interaction with students. However, the traditional professor's monologue in the classroom is not really interactive teaching. The online format offers a better learning experience and more room to interact. This is a lecture with a rather technical topic. In such a context the online format offers benefits for learning that can't be obtained with old-fashioned lecture room formats.
Lecture:
During the term you will in each week obtain a new set of videos. You can choose when (and how often) 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.
Homework:
Each week you submit a brief homework (see the Moodle-page of the course). The homework counts for the final grade. We will discuss the homework in (interactive) exercises.
Discussion board:
Please use the discussion board in Moodle.
Exercises:
Fridays, 10:15-11:45. You find a link to the Zoom room in Moodle
Exam:
t.b.a.
The final grade is 2/3 the result of a final exam and 1/3 the weekly homework.
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:
  • Introduction
  • Equilibrium concepts
  • Symmetric private values
  • Revision: Random variables
  • Revision: Jointly distributed random variables
  • Order Statistics
  • Joint distribution of order statistics
  • Bidding equilibria in the first-price auction
  • Revenue equivalence
  • Using the revenue equivalence principle
  • Risk aversion
  • Interdependent values
Past exams
Please send feedback and questions to oliver.kirchkamp@uni-jena.de.