Vecon Lab Private Value Auction: Introduction

This program implements a variety of auctions in which bidders first observe their own randomly determined private values, either from identical or differing distributions. In a first-price auction, the high bidder earns the difference between the person's own value and the price paid. An alternative is to set up an "all-pay" auction in which the high bidder wins but all must pay their own bid prices, whether or not they win (as would be the case when bids involve real expenditures on lobbying, etc.). Another option is to set a fraction of the auction revenue that is returned to each bidder, e.g. a fundraising auction where the revenue provides a public good that is of some value to the bidder.
In a "second-price auction," the price paid by the winner is the second highest bid, and the optimal bid is equal to the private value, in contrast with a "first-price auction" where the winning bid is paid, and it is optimal to bid below value (although some overbidding is observed). This experiment illustrates the strategic effects of incentives.

Vecon Lab - August 28, 2014