Why Every Economist Should Learn Some Auction Theory

Abstract

We discuss the strong connections between auction theory and "standard" economic theory; we show that situations that do not at first sight look like auctions can be recast to use auction-theoretic techniques; and we argue that auction-theoretic tools and intuitions can provide useful arguments and insights in a broad range of mainstream economic settings. We also discuss some more obvious applications, especially to industrial organization. This was an Invited Symposium paper for the 2000 (Seattle) World Congress of the Econometric Society.

Keywords: Auctions, Bidding, Auction Theory, Private Values, Common Values, Mechanism Design, Litigation, Stock Markets, Queues, Financial Crashes, Brand Loyalty, War of Attrition, Bertrand, Perfect Competition, E-Commerce, Spectrum Auctions, Treasury Auctions, Electricity, Internet

JEL Classification: D44, L13, D43, K41, L96, L94, D42, G14, L81