Putting Auction Theory to Work

This book provides a comprehensive introduction to modern auction theory and its important new applications.

Paul Milgrom (Author)

9780521536721, Cambridge University Press

Paperback, published 12 January 2004

396 pages, 8 b/w illus. 4 tables
22.6 x 15.3 x 2.2 cm, 0.54 kg

'I recommend this book to all graduate or advanced graduate students and researchers with an interest in auction theory. It is a must for auction designers. it is only a matter of time before Milgrom's book becomes part of the standard toolkit for both theorists and practioners alike. Jean Tirole is right when he says that no one is better qualified than Paul Milgrom to give an up-to-date and lucid journey through the fascinating landscape of auction theory.' De Economist

This book provides a comprehensive introduction to modern auction theory and its important new applications. It is written by a leading economic theorist whose suggestions guided the creation of the new spectrum auction designs. Aimed at graduate students and professionals in economics, the book gives the most up-to-date treatments of both traditional theories of 'optimal auctions' and newer theories of multi-unit auctions and package auctions, and shows by example how these theories are used. The analysis explores the limitations of prominent older designs, such as the Vickrey auction design, and evaluates the practical responses to those limitations. It explores the tension between the traditional theory of auctions with a fixed set of bidders, in which the seller seeks to squeeze as much revenue as possible from the fixed set, and the theory of auctions with endogenous entry, in which bidder profits must be respected to encourage participation.

Section 1. Getting to Work: 1. Politics sets the stage
2. Designing for multiple goals
3. Comparing seller revenues
4. The academic critics
5. Plan for this book
Part I. The Mechanism Design Approach
Section 2. Vickrey–Clarke–Groves Mechanisms: 6. Formulation
7. Always optimal and weakly dominant strategies
8. Balancing the budget
9. Uniqueness
10. Disadvantages of the Vickrey auction
11. Conclusion
Section 3. The Envelope Theorem and Payoff Equivalence: 12. Hottelling's lemma
13. The envelope theorem in integral form
14. Quasi-linear payoffs
15. Conclusion
Section 4. Bidding Equilibrium and Revenue Differences: 16. The single crossing conditions
17. Deriving and verifying equilibrium strategies
18. Revenue comparisons in the benchmark model
19. Expected-revenue maximizing auctions
20. Conclusion
Section 5. Interdependence of Types and Values: 21. Which models and assumptions are 'useful'?
22. Statistical dependence and revenue-maximizing auctions
23. Wilson's drainage tract model
24. Correlated types model interdependent values
25. Conclusion
Section 6. Auctions in Context: 26. The profit and surplus contribution of an entrant
27. Symmetric models with costly entry
28. Asymmetric models: devices to promote competition
29. After the bidding ends
30. Conclusion
Part II. Multi-Unit Auctions
Section 7. Uniform Price Auctions: 31. Uniform price sealed bid auctions
32. Simultaneous ascending auctions
33. Conclusion
Section 8. Package Auctions and Combinatorial Bidding: 34. Vickrey auctions and the monotonicity problems
35. Bernheim–Whinston first-price package auctions
36. Ausubel–Milgrom ascending proxy auctions
37. Conclusion.

Subject Areas: Business mathematics & systems [KJQ], Business & management [KJ], Finance [KFF], Economics [KC]