RESEARCH INTERESTS: Microeconomic Theory, Industrial Organization,, Market Design, Auction Theory, Bounded Rationality, Experimental Economics, Political Economy
In particular, I have focused my attention:
- to the issue of Efficiency and Information aggregation in Auctions/Market institutions
-the design and/or the experimental test of auction mechanisms.
More recently, I am working on:
-Information Design and Dynamic Contests
-Political Economy and Media Economics
You can find a summary of my Research here: RESEARCH OUTLINE
"How to pick a Winner", with Andrea Mattozzi
"How to Boost Revenues in FPAs? The Magic of Disclosing only Winning bids from Past Auctions", with Philippe Jehiel and Peter Katuscak
"Signaling in a Private and Common Value Environment"
WORK IN PROGRESS:
“Markets for Persuasive Information”, with Topi Miettinen
“Stimulating efforts by coarsening information”, with Levent Celik
Reserve prices are used by sellers to modify the allocation induced by standard auctions. The existing literature has shown that, if the number of bidders is fixed, a reserve price can be used to increase expected revenues. This comes at the expense of efficiency when the auctioned good goes unsold. Instead, when the number of bidders is not fixed, a reserve price may discourage entry. The reduction in the number of bidders caused by the reserve price in this situation is detrimental for both revenues and efficiency. This work shows that a different conclusion may emerge when potential entrants arrive sequentially and face the risk of incurring losses conditional on winning the object on sale. In fact, we show that reserve prices may lead to more entry and raise the efficiency. Applications characterized by the presence of an incumbent who is better informed about some common characteristics of the object for sale may yield the type of features that are needed for our different conclusion to hold.
We introduce a novel motive for the use of a reserve price as an instrument to raise auction revenues in ascending auctions. The effect that we stress is of inducing coarser information aggregation. The reserve price may prevent information revelation because bidders cannot precisely observe at which price other bidders leave the auction. In simple settings where valuation functions are not symmetric, this may increase the expected revenue of the auction. To illustrate this motive, we exhibit an example in which the use of a reserve price increases revenue even though there are always at least two bidders active for prices higher than the reserve price.
We analyze a setting common in privatizations, public tenders and takeovers in which the ex post efficient allocation, i.e. the first best, is not implementable. Our first main result is that the open ascending auction is not second best because it is prone to rushes, i.e. all active bidders quitting simultaneously, that undermine its efficiency. Our second main result is that the second best can be implemented with a two-round auction used in real-life privatizations. We also show how this result generalizes using a survival auction with a novel tie-breaking rule.
We provide a natural setting in privatizations in which the equilibrium of the first price auction gives greater expected surplus than any equilibrium of the open ascending auction.
We analyze a rationale for hiding information in open ascending auction formats. We focus on the incentives for a bidder to call a price higher than the highest standing one in order to prevent the remaining active bidders from aggregating more accurate information by observing the exact drop out values of the opponents who exit the auction. We show that the decision whether to allow jump bids or not can have a drastic impact on revenue and efficiency.
We show that jump bids can be used by a bidder to create a winner's curse and preserve an informational advantage that would otherwise disappear in the course of an open ascending auction. The effect of the winner's curse is to create allocative distortions and reduce the seller's expected revenue. Two novel features of equilibrium jump bids are derived. First, the jump bid may fail to hide completely the value of the common value component. Second, a bidder with a higher type might jump bid less frequently than a bidder with a lower type.
Does the type of posterior feedback affect how people decide in one-shot environments? We revisit this question in first-price auction markets. We consider three feedback types: minimal (only knowing whether winning or not), loser (also knowing the winning bid) and winner (knowing the second highest bid if winning). Filiz-Ozbay and Ozbay (“Auction with Anticipated Regret: Theory and Experiments,” American Economic Review, 2007, 54(4), 809-819) find that loser as opposed to minimal or winner feedback increases bids. We use three novel protocols and additionally replicate theirs. Using a sample of 624 subjects, we find that bidders’ ex ante knowledge of posterior feedback type has no systematic effect on the average bid/value ratios.
"On the Optimality of not Allocating", with Angel Hernando-Veciana, Economics Letters 125 (2014), 233-235
We show that the commitment to not allocate may be exploited by a seller/social planner to increase the expected social surplus that can be achieved in the sale of an indivisible unit.
"Second Best Efficiency and The English Auction" with Angel Hernando-Veciana, Games and Economic Behavior 73 (2011), 496–506
We study the second best in a single unit sale to two bidders. This is the allocation that maximizes the expected social surplus subject to the biddersʼ incentive compatible constraints when the first best is not implementable. We prove that Maskinʼs (1992) result that any first best allocation that is deterministic and monotone can be implemented with the English auction carries over to the second best.