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Revisiting the Anglo-Dutch Auction

Author

Listed:
  • Daniel Marszalec

    (Faculty of Economics, The University of Tokyo)

Abstract
The Anglo-Dutch auction of Klemperer (1998) is the unit-demand precursor of the many two-stage hybrid auctions currently used for the allocation of high value goods such as mobile telephony licenses, bus routes, and public procurement. This breadth of practical applications has been largely matched by an absence of theoretical results regarding the performance of hybrid auctions relative to their simpler component counterparts: the ascending and first-price auctions. To address this imbalance, I analyze an asymmetric discrete-valuation model of the Anglo-Dutch auction and derive a complete revenue ranking between the Anglo-Dutch, ascending and first-price auctions. I find that the Anglo-Dutch auction can revenue-dominate for a small set of parameters, and ranks revenue-last in an even smaller number of cases. For most parameter values the Anglo-Dutch auction ranks as intermediate. I also show that the auction performs particularly well when bidders face small entry costs and almost-common values. Overall, the Anglo-Dutch auction is rarely "the best of both worlds", but even more rarely performs worst - for this reason, it may be a prudent policy choice if the auctioneer has imprecise information about the magnitude of asymmetries across bidders.

Suggested Citation

  • Daniel Marszalec, 2016. "Revisiting the Anglo-Dutch Auction," CIRJE F-Series CIRJE-F-1021, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2016cf1021
    as

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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2016/2016cf1021.pdf
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    References listed on IDEAS

    as
    1. Cramton, Peter & Schwartz, Jesse A, 2000. "Collusive Bidding: Lessons from the FCC Spectrum Auctions," Journal of Regulatory Economics, Springer, vol. 17(3), pages 229-252, May.
    2. Abbink, Klaus & Irlenbusch, Bernd & Pezanis-Christou, Paul & Rockenbach, Bettina & Sadrieh, Abdolkarim & Selten, Reinhard, 2005. "An experimental test of design alternatives for the British 3G/UMTS auction," European Economic Review, Elsevier, vol. 49(2), pages 505-530, February.
    3. Azacis, Helmuts & Burguet, Roberto, 2008. "Incumbency and entry in license auctions: The Anglo-Dutch auction meets another simple alternative," International Journal of Industrial Organization, Elsevier, vol. 26(3), pages 730-745, May.
    4. Levin, Dan & Ye, Lixin, 2008. "Hybrid auctions revisited," Economics Letters, Elsevier, vol. 99(3), pages 591-594, June.
    5. Cramton Peter & Schwartz Jesse A, 2002. "Collusive Bidding in the FCC Spectrum Auctions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 1(1), pages 1-20, December.
    6. Lee, Darin, 0. "Lessons from the Nigerian GSM auction," Telecommunications Policy, Elsevier, vol. 27(5-6), pages 407-416, June.
    7. John McMillan, 1994. "Selling Spectrum Rights," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 145-162, Summer.
    8. Riley, John G, 1989. "Expected Revenue from Open and Sealed Bid Auctions," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 41-50, Summer.
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