Auctions

Throughout these pages we present a brief introduction to the main concepts and results of Auction Theory, an applied branch of Game Theory that has a theoretical structure worthy of explanation.

 

Page 1) Why Auctions?

Page 2) The English and Second-price sealed bid auctions

Page 3) The Dutch and First-price sealed bid auctions (2-5.org and affiliates use it)

Page 4) The Revenue Equivalence Theorem and further reading

 

The material is divided in four pages.

In page 1 we explain why auctions are worthy and list the main assumptions we will make in the subsequent pages from a game-theoretical point of view. There exist four main kinds of auctions: the English auction, the Dutch auction, the first-price sealed-bid auction and the second-price sealed-bid or Vickrey's auction (essentially equivalent to eBay's auction style).

In page 2 we will describe the English auction (the most common type of auction) and the second-price sealed-bid or Vickrey's auction establishing the relationship between the two.

In page 3 we will describe and establish the relationship between the Dutch and first-price sealed-bid auctions.

Finally, page 4 will be devoted to the statement of the celebrated Revenue Equivalence Theorem and the exposition of some more general models in which the assumptions listed in page 1 do not necessarily hold.