Time: | 1-2:30pm Tuesday/Thursday |
Venue: | M15 |
Course Description: | Studies topics in market design, focusing on auctions, auction-based marketplaces and platform markets. Covers methods and results from theory, empirical work, econometrics and experiments, highlighting practical issues in real-world design. |
Grading: | There will be an optional problem set and a research paper of approximately 15 pages. At least one-third of the paper should discuss a new and open research problem in market design and a proposal for attacking it. Up to two-thirds of the paper can be a survey of existing literature. A two-page summary of the research paper will be due about 2/3 of the way through the course, and the final paper will be due on the last day of class. Students with exams are encouraged to complete the paper sooner. |
Tentative class schedule:
Weeks 1-2: Theory of Single Unit Auctions
Week 3: Identification and Estimation of Auction Models
Week 4: Common Value Auctions-Applications
Week 5: Entry and Dynamics
Week 6: Scoring Auctions
Week 7: Procurement, Corruption and Collusion
Week 8: Theory of Multi-Unit Auctions
Week 9: Estimation of Multi-Unit Auctions
Week 10: Auction Platforms
Week 11: Trust and Reputation
Week 12: Online Advertising
Week 13: Spillover Week/TBA
Reading List
I Theory of Single Unit Auctions
- McAfee, P. and J. McMillan, Auctions and Bidding, Journal of Economic Literature, June 1987, pp. 699-738.
- Milgrom, P., Auctions and Bidding: A Primer, Journal of Economic Perspectives, Summer 1989, pp 3-22.
- (*) Milgrom, P. and R. Weber, A Theory of Auctions and Competitiv Bidding, Econometrica, 50 (5), September 1982, 1089-1122.
II-III Econometric Identification and Estimation of Single Unit Auctions
- (*) Athey, S. and P. Haile, Empirical Models of Auctions
- Athey, S. and P. Haile, Nonparametric Approaches to auctions, Handbook of Econometrics, Volume 6, Issue A, Pages 3847–3965.
- Athey, S. and P. Haile, Identification in Standard Auction Models, Econometrica. 70 (6), November 2002, pp. 2107-2140.
- (*) Guerre, E., I. Perrigne, and Q. Vuong, Optimal Nonparametric Estimation of First-Price Auctions, Econometrica 68(3), May 2000, 525-74.
- (*) Haile, P. and E. Tamer, Inference with an Incomplete Model of English Auctions, Journal of Political Economy, 111(1), February 2003.
- Laffont, J.-J., H. Ossard, and Q. Vuong, Econometrics of First Price Auctions, Econometrica, July 1995, p. 953-80.
- Kagel, J. Auctions: A Survey of Experimental Research, in J. Kagel and A. Roth, eds, The Handbook of Experimental Economics.
- Krasnokutskaya, E. (2004) Identification and Estimation in Highway Procurement Auctions under Unobserved Auction Heterogeneity, working paper, U. Penn
- Li, T., I. Perrigne and Q. Vuong, Conditionally Independent Private Information in OCS Wildcat Auctions, Journal of Econometrics 98 (1), September 2000, 129-61.
- Li, T., I. Perrigne, and Q. Vuong, Structural Estimation of the Affiliated Private Value Auction Model, Rand Journal of Economics, Vol. 33, No. 2, 171-193, Summer 2002.
- Li, T. and Q. Vuong, Nonparametric Estimation of the Measurement Error Model Using Multiple Indicators, Journal of Multivariate Analysis 65: 139-165
IV Empirical Models of Common Value Auctions
- Haile, P., Hong H, and M. Shum (2003), Nonparametric Tests for Common
- Values at First-Price Sealed-Bid Auctions, NBER Working Paper 10105
- (*) Hendricks, K. and R. Porter, An Empirical Study of an Auction with Asymmetric Information, American Economic Review, December 1988, pp. 865-83.
- (*) Hendricks, K., J. Pinkse, and R. Porter, Empirical Implications of Equilibrium Bidding in First-Price, Symmetric, Common Value Auctions, Review of Economic Studies 70 (1), 2003. See also working Paper 0008, August 1999.
- Hong, H. and M. Shum (2002), Increasing Competition and the Winner’s Curse: Evidence from Procurement, Review of Economic Studies, 69:871-898
- Hong, H. and M. Shum (2003), Econometric Models of Ascending Auctions, Journal of Econometrics 112:327-258.
V Entry and Dynamics
- Athey, S., J. Levin and E. Seira, Comparing Open and Sealed Bid Auctions: Theory and Evidence from Timber Auctions, Quarterly Journal of Economics, vol. 126(1), 2011, 207-257
- (*) Bajari, P. and A. Hortacsu, Winner’s Curse, Reserve Prices, and Endogenous Entry: Empirical Insights from Ebay Auctions, Forthcoming, RAND Journal of Economics.
- Haile, P., Auctions with Resale Markets: An Application to U.S. Forest Service Timber Sales, American Economic Review, 92 (3), June 2001, 399-427.
- Levin, D. and J. Smith (1994), Equilibrium in Auctions with Entry, American Economic Review, 84: 585-599.
- Li, T., Econometrics of First-Price Auctions with Binding Reservation Prices, working paper, University of Iowa.
- (*) Pesendorfer, M. and M. Jofre-Benet, Bidding Behavior in a Repeated Procurement Auction, Mimeo, Yale, 2000.
VI Theory of Multi-Unit Auctions and Applications
- Ausubel, Lawrence M., Peter Cramton, and Paul Milgrom. 2006. “The Clock-Proxy Auction: A Practical Combinatorial Auction Design ,” in Peter Cramton, Yoav Shoham, and Richard Steinberg (eds.), Combinatorial Auctions, Chapter 5, MIT Press, 2006.
- Ausubel, Lawrence M. and Peter Cramton. 2004. “Auctioning Many Divisible Goods,” Journal of the European Economic Association, 2, 480-493.
- Ausubel, Lawrence M. and Peter Cramton. 2002. “Demand Reduction and Inefficiency in Multi-Unit Auctions.” Working Paper, University of Maryland.
- Ausubel, Lawrence M. and Paul Milgrom. 2002. “Ascending Auctions with Package Bidding.” Frontiers of Theoretical Economics 1(1), Article 1.
- Ausubel, Lawrence M. and Peter Cramton. 1999. “The Optimality of Being Efficient.” Working Paper, University of Maryland.
- (*) Cantillon, E. and M. Pesendorfer, Combination Bidding in Multi-Unit Auctions, Mimeo, Harvard Business School, 2003.
- Cramton, Peter. 1998. “Ascending Auctions.” European Economic Review, 42, 745-756.
VII Econometrics of Multi-Unit Auctions and Applications
- Bajari, P. and J. Fox (2007), Measuring the Efficiency of an FCC Spectrum Auction, working paper, University of Chicago
- Cantillon, Estelle and Martin Pesendorfer. 2007. “Combination Bidding in Multi-Unit Auctions.” Mimeo, Centre for Economic Policy Research, LSE.
- Cantillon Estelle and Martin Pesendorfer. 2004. “Auctioning Bus Routes: The London Experience,” later published as Chapter 22 in Combinatorial Auctions, Cramton, Shoham and Steinberg (eds), MIT Press. 2006.
- (*) Hortacsu, A. (2002), Mechanism Choice and Strategic Bidding in Divisible Goods Auctions: An Empirical Analysis of the Turkish Treasury Auction Market, working paper, University of Chicago.
- Kastl, J. (2007), Discrete Bids and Empirical Inference in Divisible Goods Auctions, working paper, Stanford.
VIII Scoring Auctions
- (*) Athey, S. and J. Levin, Information and Competition in U.S. Forest Service Timber Auctions, Journal of Political Economy, 109 (2), April 2001: 375-417.
- Agarwal, N, Athey, S. and D. Yang, Skewed Bidding in Per Per Action Auctions for Online Advertising, American Economic Review, 99(2): 441-47.
- (*) Asker. J. and E. Cantillon (2008), Properties of Scoring Auctions forthcoming in Rand Journal of Economics.
- Bajari, P, Houghton S, and S. Tadelis, (2007), Bidding for Incomplete Contracts, working paper, U. Minnesota.
- (*) Bajari, P. and Lewis, G. (2008) Procurement Contracts with Time Incentives: Theory and Evidence, working paper, Harvard.
- Kagel, J., R. Harstad and D. Levin, Information Impact and Allocation Rules in Auctions with Affiliated Private Values: A Laboratory Study, Econometrica, 55 (1987), pp. 1275-1304.
- Porter, R., The Role of Information in U.S. Offshore Oil and Gas Lease Auctions, Econometrica, 63 (January 1995), pp. 1-27.
IX Corruption and Collusion
Theory
- Athey, S., K. Bagwell, and C. Sanchirico, Collusion and Price Rigidity, (2002) forthcoming, Review of Economic Studies.
- Athey, S. and K. Bagwell, Optimal Collusion with Private Information, RAND Journal of Economics, Autumn 2001.
- Athey, S. and K. Bagwell, Collusion with Persistent Cost Shocks, Econometrica, Vol. 76, No 3 (May, 2008), 493-540.
- Graham, D. and Marshall, R. (1987), Collusive Bidder Behavior at Single-Object Second-Price and English Auctions, Journal of Political Economy, 95, 1217-39.
- (*) McAfee, P. and J. McMillan (1992), Bidding Rings, American Economic Review, 82: 579-599.
- Skryzpacz, A. and H. Hopenhayn (2004), Tacit Collusion in Repeated Auctions, Journal of Economic Theory, 11: 153-69.
Empirics
- (*) Asker, J. A Study of the Internal Organization of a Bidding Cartel, working paper, NYU Stern
- Cramton, Peter and Jesse Schwartz. 2003. “Collusive Bidding in the FCC Spectrum Auctions.” Contributions to Economic Analysis & Policy, 1(1). [presentation]
- Porter, R. and D. Zona, Detection of Bid Rigging in Procurement Auctions, Journal of Political Economy, June 1993, pp. 518-38.
- (*) Tran, A. (2008), Can Procurement Auctions Reduce Corruption? Evidence form the Internal Records of a Bribe-Paying Firm, working paper, Harvard.
X Auction-Based Platforms
X.A Online Advertising Markets
- (*) Athey, Susan and Glenn Ellison. 2007. “Position Auctions with Consumer Search.”
- Borgers, Tilman, Ingemar Cox, Martin Pesendorfer, and Vaclav Petricek. 2006. “Equilibrium Bids in Sponsored Search Auctions: Theory and Evidence.” Working Paper, LSE.
- Edelman, Benjamin, Ostrovsky, Michael, and Schwartz, Michael. 2007. “Internet Advertising and the Generalized Second Price Auction: Selling Billions of Dollars Worth of Keywords.” American Economic Review, 97(1), 242-259.
- Varian, Hal R. 2006. “Position Auctions.” Mimeo, UC Berkeley.
X.B Online Auctions for Goods and Services
- (*) Budish, E. (2007), Sequencing and Information Revelation in Auctions for Imperfect Substitutes: Understanding eBay’s Market Design
- (*) Lewis, G. (2008), Asymmetric Information, Adverse Selection and Seller
- Disclosure: The Case of eBay Motors, working paper, Harvard
- Hortacsu, Ali, Asis Martinez-Jerez and Jason Douglas. (2006). “The Geography of Trade on eBay and MercadoLibre.” NET Institute Working Paper #06-09.
- Roth, Alvin E. and Axel Ockenfels. (2002). “Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet.” American Economic Review, 92(4), 1093-1103.
- Song, U. (2004), Nonparametric Estimation of an eBay Auction Model with an Unknown Number of Bidders, working paper, University of British Columbia.
XI Trust and Reputation Systems
- (*) Josang, A. Ismail, R. and C. Boyd (2007), A Survey of Trust and Reputation Systems for Online Service Provision, Decision Support Systems, 43(2), 2007, 618-644.
- Karlan, D., Mobius, M., Rosenblat, T and A. Szeidl (2008), Trust and Social Collateral, forthcoming in QJE.
- Kreps, D, and R. Wilson (1982), Reputation and Imperfect Information, Journal of Economic Theory, 27(2): 253-279.
- (*) Resnick, P. and R. Zeckhauser. (2002) Trust Among Strangers in Internet Transactions: An Empirical Analysis of eBay’s Reputation System, in M.R. Baye, editor, The Economics of the Internet and E-Commerce, volume 11 of Advances in Applied Microeconomics, Elsevier Science.
Appendix: Specific Applications (can have overlap with above)
I.B.1 Timber
- The Canada-United States Softwood Lumber Trade Discussions. 2001. Province of British Columbia.
- Athey, Susan, Jonathan Levin, and Enrique Seira. 2011. “Comparing Open and Sealed Bid Auctions: Theory and Evidence from Timber Auctions.” Quarterly Journal of Economics, vol. 126(1), 207-257.
- Athey, Susan., Peter Cramton, and Allan Ingraham. 2002. “Auction-Based Timber Pricing and Complementary Market Reforms in British Columbia.“ Market Design, Inc. and Criterion Auctions.
- Athey, Susan and Jonathan Levin. 2001. “Information and Competition in U.S. Forest Service Timber Auctions.” The Journal of Political Economy. 109(2), 375-417.
I.B.2 Spectrum
- Ausubel, Lawrence M., Peter Cramton, R. Preston McAfee, and John McMillan. 1997. “Synergies in Wireless Telephony: Evidence from the Broadband PCS Auctions.” Journal of Economics and Management Strategy, 6(3), 497-527.
- Borgers, Tilman and Christian Dustmann. 2002. “Rationalizing the UMTS Spectrum Bids: The Case of the UK Auction.” Working Paper, University College London.
- Cramton, Peter and Jesse Schwartz. 2003. “Collusive Bidding in the FCC Spectrum Auctions.” Contributions to Economic Analysis & Policy, 1(1). [presentation]
- *Cramton, Peter. 2002. “Spectrum Auctions,” in Martin Cave, Sumit Majumdar, and Ingo Vogelsang, eds., Handbook of Telecommunications Economics, Amsterdam: Elsevier Science B.V., Chapter 14, 605-639.
- Cramton, Peter. 2000. “Lessons from the United States Spectrum Auctions.” Prepared Testimony of Peter Cramton before the United States Senate Budget Committee.
- Cramton, Peter, Evan Kwerel, and John Williams. 1998. “Efficient Relocation of Spectrum Incumbents.” Journal of Law and Economics, 41, 647-675.
- Cramton, Peter. 1997. “The FCC Spectrum Auctions: An Early Assessment.” Journal of Economics and Management Strategy, 6(3), 431-495.
- Jehiel, Philippe and Benny Moldovanu. 2001. “The European UMTS/IMT-2000 License Auctions.” Working Paper, University of Mannheim.
- Milgrom, Paul.1996. “Procuring Universal Service: Putting Auction Theory to Work.” Lecture at the Royal Swedish Academy of Sciences.
I.B.3 Airport Landing Slots
- Ausubel, Lawrence M. and Peter Cramton. 2005. “Mock Auction of Arrival/Departure Slots at LaGuardia Airport.” University of Maryland.
I.B.4 Electricity
- Borenstein, Severin, James Bushnell, and Frank Wolak. 2002. “Measuring Market Inefficiencies in California’s Restructured Wholesale Electricity Market.” American Economic Review, 92(5) 1376-1405.
- Cramton, Peter and Steven Stoft. 2006. “The Convergence of Market Designs for Adequate Generating Capacity.” Working Paper, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
- Kahn, Alfred E., Peter Cramton, Robert H. Porter, and Richard D. Tabors. 2001. “Pricing in the California Power Exchange Electricity Market: Should California Switch from Uniform Pricing to Pay-as-Bid Pricing?” Blue Ribbon Panel Report, California Power Exchange.
- Wilson, Robert. 1999. “Market Architecture.” Stanford University.
- Wolak, Frank A. 2001. “What Went Wrong in California’s Restructured Electricity Market?” Presentation at the AEI.
- Wolak, F., Identification and Estimation of Cost Functions Using Observed Bid Data: An Application to Electricity Markets, in Advances in Economics and Econometrics, Theory and Applications, Eighth World Congress, Volume II. Cambridge University Press, 2003.
I.B.5 Pollution Permits
- Cramton, Peter and Suzi Kerr. 2002. “Tradeable Carbon Permit Auctions: How and Why to Auction Not Grandfather.” Energy Policy, 30, 333-345.
- Ellerman, A.Denny, Richard Schmalensee, Paul L. Joskow, Juan Pablo Montero, and Elizabeth M. Brady. DATE? “Emissions Trading Under the U.S.Acid Rain Program: Evaluation of Compliance Costs and Allowance Market Performance.” Center for Energy and Environmental Policy Research, Massachusetts Institute of Technology.
I.B.6 Treasury Bills
- Bikhchandani, Sushil and Chi-Fu Huang. 1993. “The Economics of Treasury Securities Markets.” Journal of Economic Perspectives, 7(3), 117-134.
- Malvey, Paul F., Christina M. Archibald, and Sean T. Flynn. 1998. “Uniform-Price Auctions: Evaluation of the Treasury Experience.”
- Malvey, Paul F., Christina M. Archibald. 1998. “Uniform-Price Auctions: Update of the Treasury Experience.” Office of Market Finance, U.S. Treasury.
I.B.7 Bus Routes and Combinatorial Auctions
I.C.1 eBay
- Ariely, Dan, Axel Ockenfels, and Alvin E. Roth. 2005. “An Experimental Analysis of Ending Rules in Internet Auctions.” RAND Journal of Economics, 36(4), 891-908.
- Bajari, Patrick and Ali Hortacsu. 2004. “Economic Insights from Internet Auctions.” Journal of Economic Literature, 42, 457-486.
- Bajari, Patrick and Ali Hortacsu. 2002. “Cyberspace Auctions and Pricing Issues: A Survey of Empirical Findings.” Published in The New Economy Handbook. Derek C. Jones, ed. 2003.
- Bajari, Patrick and Ali Hortacsu. 2003. “The Winner’s Curse, Reserve Prices, and Endogenous Entry: Empirical Insights from eBay Auctions.” RAND Journal of Economics, 34(2), 329-355.
- Hortacsu, Ali, Asis Martinez-Jerez and Jason Douglas. 2006. “The Geography of Trade on eBay and MercadoLibre.” NET Institute Working Paper #06-09.
- Roth, Alvin E. and Axel Ockenfels. 2002. “Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet.” American Economic Review, 92(4), 1093-1103. (See Hal Varian’s NY Times column on this work here).
I.C.2 Online Auctions: Auctions for Sponsored Links
- Athey, Susan and Glenn Ellison. 2011. “Position Auctions with Consumer Search.” Quarterly Journal of Economics, vol. 126(3), 1213-1270
- Borgers, Tilman, Ingemar Cox, Martin Pesendorfer, and Vaclav Petricek. 2006. “Equilibrium Bids in Sponsored Search Auctions: Theory and Evidence.” American Economic Journal: Microeconomics, 5(4), 163-187.
- Edelman, Benjamin, Ostrovsky, Michael, and Schwartz, Michael. 2007. “Internet Advertising and the Generalized Second Price Auction: Selling Billions of Dollars Worth of Keywords.” American Economic Review, 97(1), 242-259.
- Varian, Hal R. 2006. “Position Auctions.” Mimeo, UC Berkeley.
I.C.3 Online Auctions: Auctions for Display Advertising
- Levin, Jonathan and Paul Milgrom, 2010, Online Advertising: Heterogeneity and Conflation in Market Design. American Economic Review, forthcoming.
- Ghosh, Arpita, Preston McAfee, Kishore Papineni, and Sergei Vassilvitskii, 2009, Bidding for Representative Allocations for Display Advertising, working paper.
- Lewis, Randall and David Reiley, Retail Advertising Works! Working Paper. Presentation.
Two-Sided Markets
- Ambrus, Atilla and Rosella Argenziano. 2006. “Asymmetric Networks in Two- sided Markets.” Mimeo, Harvard University.
- Armstrong, Mark. 2006. “Competition in Two-Sided Markets.” RAND Journal of Economics, 37(3), 668-691.
- Armstrong, Mark and Julian Wright. 2006. “Two-Sided Markets, Competitive Bottlenecks, and Exclusive Contracts.” Economic Theory, 32(2), 353-380.
- Caillaud, Bernard and Bruno Jullien. 2003. “Chicken and Egg: Competition Among Intermediation Service Providers.” RAND Journal of Economics, 34(2), 309-328.
- Ellison, Glen, Drew Fudenberg, and Markus Mobius. 2004. “Competing Auctions.” Journal of the European Economic Association, 2(1), 30-66.
- Evans, David S. 2003. “The Antitrust Economics of Multi-Sided Platform Markets.” Yale Journal on Regulation, 20, 325-382.
- Hagiu, Andrei. 2006. “Pricing and Commitment by Two-Sided Platforms.” RAND Journal of Economics, 37(3), 720-737.
II.A Dating Markets
- Fisman, Raymond, Sheena Iyengar, Emir Kamenica, and Itamar Simonson. 2006. “Gender Differences in Mate Selection: Evidence from a Speed Dating Experiment.” Quarterly Journal of Economics, 121(2), 673-697.
- Fisman, Raymond, Sheena S. Iyengar, Emir Kamenica, Itamar Simonson. 2005. “Searching For a Mate: Evidence From a Speed Dating Experiment.” Working Paper, Columbia University.
- Fisman, Raymond, Sheena Iyengar, Emir Kamenica, & Itamar Simonson. DATE? “Racial Preferences in Dating.” Review of Economic Studies, 2007, forthcoming.
- Hortacsu, Ali, Guenter Hitsch and Dan Ariely. 2006. “What Makes You Click? Mate Preferences and Matching Outcomes in Online Dating.” MIT Sloan Research Paper #4603-06. Link to Hal Varian’s NY Times column on this paper.
II.B Media Markets
- Anderson, Simon and Stephen Coate. 2005. “Market Provision of Broadcasting: A Welfare Analysis.” Review of Economic Studies 72(253), 947-952.
- Athey, Susan and Joshua Gans, 2010.The Impact of Targeting Technology on Advertising Markets and Media Competition. American Economic Review, forthcoming.
- Bergemann, Dirk and Alessandro Bonatti, 2009. Targeting in Advertising Markets: Implications for New and Old Media. Working Paper, Yale University.
- Anderson, Simon and Joshua S. Gans, 2009. Platform Siphoning. Working Paper, University of Virginia. Presentation.
- Gentzkow, Matt and Jesse M. Shapiro, 2008, Competition and Truth in the Market for News, Journal of Economic Perspectives, Spring 2008, 133-154.
- Gentzkow, Matt and Jesse M. Shapiro, 2010, What Drives Media Slant? Evidence from U.S. Daily Newspapers, Econometrica, January 2010, 35-71.