Asymptotic Analysis of Large Auctions with Risk-Averse Bidders Academic Article uri icon

abstract

  • We study private-value auctions with n risk-averse bidders, where n is a large number. We first use asymptotic techniques to calculate explicit approximations of the equilibrium bids and of the seller's revenue in any k-price auction (k= 1, 2,...), and use these explicit approximations to show that all large k-price auctions with risk-averse bidders are O (1/n2) revenue equivalent. We then prove that there exist auction mechanisms for which the limiting revenue as n−→∞ in the case of risk-averse bidders is strictly below the risk-neutral limit. Therefore, these auction mechanisms are not revenue equivalent to large k-price auctions even in the limit as n−→∞. Finally, we formulate a general condition under which the limiting revenue with risk-averse bidders is equal to the risk-neutral limit.∗ School of Mathematical Sciences, Tel Aviv University, Tel Aviv 69978, Israel, fibich@ tau. ac. il† …

publication date

  • January 1, 1984