TY - JOUR
AU1 - Crawford, Vincent P.
AU2 - Kugler, Tamar
AU3 - Neeman, Zvika
AU4 - Pauzner, Ady
AB - AbstractThis paper begins to explore behavioral mechanism design, replacing equilibrium by a model based on “level-k” thinking, which has strong support in experiments. In representative examples, we consider optimal sealed-bid auctions with two symmetric bidders who have independent private values, assuming that the designer knows the distribution of level-k bidders. We show that in a first-price auction, level-k bidding changes the optimal reserve price and often yields expected revenue that exceeds Myerson's (1981) bound; and that an exotic auction that exploits bidders' non-equilibrium beliefs can far exceed the revenue bound. We close with some general observations about level-k auction design.
TI - Behaviorally Optimal Auction Design: Examples and Observations
JF - Journal of the European Economic Association
DO - 10.1162/JEEA.2009.7.2-3.377
DA - 2009-05-01
UR - https://www.deepdyve.com/lp/oxford-university-press/behaviorally-optimal-auction-design-examples-and-observations-7C0i4Uz0vC
SP - 377
EP - 387
VL - 7
IS - 2-3
DP - DeepDyve
ER -