Date of Award

6-2013

Document Type

Open Access

Degree Name

Bachelor of Arts

Department

Economics

First Advisor

Yufei Ren

Language

English

Keywords

auctions, bidders, seller, profit

Abstract

With a history of more than 2500 years, auctions have long been used to negotiate the exchange of goods and commodities. In an auction, bidders compete with rivals by submitting bids depending on their personal evaluations of the goods. The good is allocated to the bidder who offers the highest bid. There are many different types of auctions, but four major ones are primarily concerned by economists and researchers--the English auction, the Dutch auction, the sealed-bid first-price auction and the sealed-bid second-price auction. My thesis mainly focuses on the characteristics of the sealed-bid second-price auction, with both continuous and discrete bidding. My thesis discusses the bidder's strategies that can maximum the expected payoff and the seller's strategy that can affect the expected revenue. In continuous bidding, truthful bidding is the dominant strategy. In terms of the discrete bidding, my thesis applies the model from Yu (1999) to specifically discuss the sealed-bid second-price auction and finds out equilibrium strategy using the expected payoff function from buyers. My thesis discusses the trade-off between the winning probability and expected payoff for buyers and gives out suggestion on bidding based on individual's risk preference. Also, my thesis discusses the expected revenue function for sellers and the factors affecting the expected revenue.

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