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Virtue of Simplicity in Asymmetric Auctions

Author

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  • Shraman Banerjee

    (Department Of Economics, Shiv Nadar University)

  • Swagata Bhattacharjee

    (Department Of Economics, Ashoka University)

Abstract

In single object auctions with asymmetric bidders, the Myerson Optimal auction is difficult to implement because of its informational requirements, complexity, and a possible discouragement effect on the bidders. This paper experimentally studies the performance of a "Simple" auction (Hartline and Roughgarden, 2009) vis-a-vis Optimal auction. We find that Simple auction revenue- approximates Optimal auction better than what the theory predicts: under weak asymmetry the revenue difference is not statistically significant. We explore the bidding behavior and show that the high type bidders get discouraged in Optimal auction. We also explore the role of cognitive ability in the bidding behavior.

Suggested Citation

  • Shraman Banerjee & Swagata Bhattacharjee, 2023. "Virtue of Simplicity in Asymmetric Auctions," Working Papers 2023-01, Shiv Nadar University, Department of Economics.
    • Handle: RePEc:alr:wpaper:2023-01
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Optimal Auction; Simple Auction; Asymmetric Bidders; Experiment.;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General

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