- How risk sharing may enhance efficiency of English auctions
- Economic Journal
- Volume | Issue number
- 128 | 610
- Pages (from-to)
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
Amsterdam Business School Research Institute (ABS-RI)
English auctions are known to be ex post efficient under various circumstances. However, they are inefficient ex ante for risk-averse seller and bidders. Our analysis of the English premium auction (EPA) reveals that, while maintaining ex post efficiency, awarding a premium to the highest two bidders makes the auction more attractive to all risk-averse bidders. This result is remarkably general, as it holds with possible interdependent bidder valuations and affiliated types. When bidders exhibit independent types, the EPA can also benefit a risk-averse seller and therefore strictly improve ex ante, or interim, Pareto efficiency of the English auction.
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