How Efficient are Decentralized Auction Platforms?

Abstract

<jats:title>Abstract</jats:title> <jats:p>We model a decentralized, dynamic auction market platform in which a continuum of buyers and sellers participate in simultaneous, single-unit auctions each period. Our model accounts for the endogenous entry of agents and the impact of intertemporal optimization on bids. We estimate the structural primitives of our model using Kindle sales on eBay. We find that just over one third of Kindle auctions on eBay result in an inefficient allocation with deadweight loss amounting to 14% of total possible market surplus. We also find that partial centralization–for example, running half as many 2-unit, uniform-price auctions each day–would eliminate a large fraction of the inefficiency, but yield lower seller revenues. Our results also highlight the importance of understanding platform composition effects–selection of agents into the market–in assessing the implications of market redesign. We also prove that the equilibrium of our model with a continuum of buyers and sellers is an approximate equilibrium of the analogous model with a finite number of agents.</jats:p>

Identification in ascending auctions, with an application to digital rights management

“…This condition roughly means that higher‐value bidders tend to bid later in the auction and lower‐value bidders tend to bid earlier. Several recent papers provide evidence consistent with this condition in eBay auctions (the focus of our application), including Hendricks and Sorensen (2018), Bodoh‐Creed, Boehnke, and Hickman (forthcoming), and Coey, Larsen, and Platt (2020), and we document similar evidence in Section 4.2. The assumption is not formally testable in our data, however, but we will describe below an approach for evaluating potential violations of this assumption.…”

Search and resale frictions in a two-sided online platform: A case of multi-use assets

“…Sailer (2006) reports that the bidding cost is $16.47 (≈e13.19 ≈£10.42) for PDA devices. Recently, Bodoh-Creed et al (2016) report that the average participation cost for an Amazon Kindle device sold on eBay auctions is slightly lower than $10 (≈e8.01 ≈£6.33). Despite the fact that environments are slightly different in terms of auctioned items and bidder-seller ratios, the latter two broadly agree with our estimates.…”

“…Sailer (2006) proposes a dynamic auction model and estimates the buyer-side search costs on eBay for mobile devices. By using the continuum bidder dynamic programming model, the recent work of Bodoh-Creed et al (2016) reports that there is a buyer-side opportunity cost on eBay. Oppositely, Dinerstein et al (2018) construct a seller-side optimization problem and report large seller-side costs on eBay.…”

“…The Online Appendix provides a model for an optimal monopoly price.15 SeeHolmes (2011) for a dynamic modeling with perfect foresight.16 See alsoSailer (2006),Hendricks and Sorensen (2015),Backus andLewis (2016), andBodoh-Creed et al (2016), which model similar settings of exogenous supply, for further discussions.…”

Experimental Evidence on Semi-structured Bargaining with Private Information

“…9 There is a large and prominent theoretical literature on auctions (e.g., Milgrom and Weber 1982;Thaler 1988;Klemperer 1996;Bulow and Klemperer 2002;Jackson and Kremer 2006;Milgrom and Segal 2020). This literature has recently been complemented by observational studies on online auctions (e.g., Horton et al 2017;Bodoh-Creed et al 2021).…”