Dutch vs. first-price auctions with expectations-based loss-averse bidders

Balzer, Benjamin; Rosato, Antonio; Wangenheim, Jonas von

doi:10.1016/j.jet.2022.105545

Cited by 5 publications

(2 citation statements)

References 98 publications

(118 reference statements)

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“…Second, the optimal mechanisms derived in a bilateral trade setting augmented by KR preferences in Benkert (2022) carry over to the case of BLS preferences, too. Finally, Balzer et al (2021) compare the Dutch and the first-price auction when bidders have KR preferences. While they do not consider the problem of designing optimal mechanisms, our result nevertheless offers some insights: Given the binary outcomes in both consumption (getting the good or not) and money (paying the bid or not), we can apply Lemma 2 on both dimensions, implying that the expected utility of a KR and a BLS agent coincide.…”

Section: Discussionmentioning

confidence: 99%

On the Equivalence of Optimal Mechanisms with Loss and Disappointment Aversion

Benkert

2022

SSRN Journal

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Section: Discussionmentioning

confidence: 99%

On the Equivalence of Optimal Mechanisms with Loss and Disappointment Aversion

Benkert

2022

SSRN Journal

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“…All the papers mentioned thus far restrict attention to static auctions. Two recent papers compare static and dynamic auctions with loss‐averse bidders: Balzer, Rosato, and von Wangenheim (2022) show that the Dutch auction raises more revenue than the FPA, while von Wangenheim (2021) shows that with independent private values, the SPA raises more revenue than the English auction. Different from these previous contributions, my paper is the first to study the role of loss aversion in multi‐unit auctions.…”

Section: Related Literaturementioning

confidence: 99%

Loss aversion in sequential auctions

Rosato

2023

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I analyze sequential auctions with expectations‐based loss‐averse bidders who have independent private values and unit demand. Equilibrium bids are history dependent and subject to a “discouragement effect”: the higher is the winning bid in the current round, the less aggressive are the bids of the remaining bidders in the next round. Moreover, because they experience a loss in each round in which they fail to obtain an object, bidders are willing to pay a premium to win sooner rather than later. This desire to win earlier leads prices to decline in equilibrium. I also show how various disclosure policies regarding the outcome of earlier auctions affect equilibrium bids, and that sequential and simultaneous auctions are neither bidder‐payoff equivalent nor revenue equivalent.

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Bilateral trade with loss-averse agents

Benkert

2024

Econ Theory

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We introduce expectations-based loss aversion, which can explain the empirically well-documented endowment and attachment effect, into the classical bilateral-trade setting (Myerson and Satterthwaite in J. Econ. Theory 29:265–281, 1983). We derive optimal mechanisms for different objectives and find that relative to no loss aversion, the platform designer optimally provides agents with partial insurance in the ownership dimension and with full insurance in the money dimension. Notably, the former is achieved either by increasing or decreasing the trade frequency, depending on the distribution of types. Finally, we show that the impossibility of inducing materially efficient trade persists with loss aversion.

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Dutch vs. first-price auctions with expectations-based loss-averse bidders

Cited by 5 publications

References 98 publications

On the Equivalence of Optimal Mechanisms with Loss and Disappointment Aversion

On the Equivalence of Optimal Mechanisms with Loss and Disappointment Aversion

Loss aversion in sequential auctions

Bilateral trade with loss-averse agents

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