15 Pages Posted: 31 Aug 2018
Date Written: August 30, 2018
Traditionally auctions have featured either an upper bound on the equilibrium price(s) that descends over time (e.g. Dutch auctions) or a lower bound on the equilibrium price(s) that ascends over time (e.g. English auctions). We argue that in many cases, auctions featuring both (viz. a narrowing channel of prices) will tend to outperform either. This channel auction preserves most of the contrasting benefits of both the English (truthful revelation) and Dutch (security for necessary information acquisition) auctions regarding behavior in the English and Dutch components of the auction. However, it can also perform well in cases where information acquisition is potentially important but also potentially unnecessary and wasteful. We discuss directions for research on how to modulate the channel convergence process using auction- revealed information, how to speed the convergence using binary search and extensions to multiple goods. Natural applications include housing, online auction sites like eBay, recording transactions on blockchains and spectrum rights.
Keywords: auctions, English, Dutch, information acquisition, exposure problem
JEL Classification: D44, D47, D83, C44
Suggested Citation: Suggested Citation