Precautionary Bidding in Auctions

Precautionary Bidding in Auctions

We analyze bidding behavior in auctions when risk-averse buyers bid for a good whose value is risky. We show that when the risk in the valuations increases, DARA bidders will reduce their bids by more than the appropriate increase in the risk premium. Ceteris paribus, buyers will be better off bidding for a more risky object in first price, second price, and English auctions with affiliated com...

Precautionary Bidding: First Price Auctions with Stochastic Values

We consider a rst-price auction where risk-averse bidders bid for an object whose value is risky, and provide the rst analysis of the pure comparative statics of risk on bidding behavior. In the private values model we show that as risk increases, decreasingly risk-averse bidders will reduce their bids by more than the risk premium (we term the e ect precautionary bidding ). Ceteris paribus, bi...

Bidding in Combinatorial Auctions

Optimal Bidding in Sequential Auctions

A bidder's strategy in one auction may affect his competitors' behavior in subsequent auctions. When this occurs, bidding in a sequence of auctions can be modeled fruitfully as a multistage control process. This paper presents such a model. In it the control is the bidder's strategy, the state characterizes the competitors' behavior and the state transition represents the competitors' reaction ...

Matrix Bidding in Combinatorial Auctions

In a combinational auction in which bidders can bid on any combination of goods, bid data can be of exponential size. We describe an innovative new combinatorial auction format in which bidders submit “matrix bids”. The advantage of this approach is that it provides bidders a mechanism to compactly express bids on every possible bundle. We describe many different types of preferences that can b...