Auction Design with Loss Averse Bidders: The Optimality of All Pay Mechanisms

Eisenhuth, Roland (2010): Auction Design with Loss Averse Bidders: The Optimality of All Pay Mechanisms.

Abstract

Auctioneers who have an indivisible object for sale and believe that bidders are risk neutral can find the recipe for an optimal auction in Myerson (1981); auctioneers who believe that bidders are loss averse can find it here: An optimal auction is an all pay auction with minimum bid, and any optimal mechanism is all pay.

• Item Type: MPRA Paper
• Language: English
• Keywords: Auctions, Loss Aversion, All Pay Mechanisms, Mechanism Design, Revenue Equivalence
• Subjects: D - Microeconomics > D0 - General > D03 - Behavioral Microeconomics: Underlying Principles; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D86 - Economics of Contract: Theory; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D44 - Auctions; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C70 - General

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