A Primer on Auction Design, Management, and Strategy
200 pp., 6 x 9 in, 3 figures, 35 tables
- Published: December 19, 2014
A guide to modeling and analyzing auctions, with the applications of game theory and auction theory to real-world auction decision making.
Auctions are highly structured market transactions primarily used in thin markets (markets with few participants and infrequent transactions). In auctions, unlike most other markets, offers and counteroffers are typically made within a structure defined by a set of rigid and comprehensive rules. Because auctions are essentially complex negotiations that occur within a fully defined and rigid set of rules, they can be analyzed by game theoretic models more accurately and completely than can most other types of market transactions.
This book offers a guide for modeling, analyzing, and predicting the outcomes of auctions, focusing on the application of game theory and auction theory to real-world auction design and decision making. After a brief introduction to fundamental concepts from game theory, the book explains some of the more significant results from the auction theory literature, including the revenue (or payoff) equivalence theorem, the winner's curse, and optimal auction design. Chapters on auction practice follow, addressing collusion, competition, information disclosure, and other basic principles of auction management, with some discussion of auction experiments and simulations. Finally, the book covers auction experience, with most of the discussion centered on energy and telecommunications auctions, which have become the proving ground for many new auction designs. A clear and concise introduction to auctions, auction design, and auction strategy, this Primer will be an essential resource for students, researchers, and practitioners.
An invaluable guide for those who want to study auction theory or to put it to practical use—from a well-known practitioner with a wealth of experience.
Paul Klemperer, Edgeworth Professor of Economics, University of Oxford
Salant draws on his own firsthand experience in advising bidders and auctioneers to explain how game theory and auction theory have guided incisive analyses and good decisions when millions or billions are at stake.
Paul Milgrom, Ely Professor of Economics, Stanford University
Finally, David Salant put it on paper. For the last 20 years I have worked with David Salant on several auctions in the telecom arena. He has the unique ability to guide people in winning auctions. And that is what it is all about: winning auctions! It is not about participating and settling for number two. And now he has written it all down in this book.
Erik Hoving, Chief Technology Officer, KPN Royal Dutch Telecom