Inefficiency of Equilibria in Query Auctions with Continuous Valuations
27 Pages Posted: 22 Jun 2006
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Inefficiency of Equilibria in Query Auctions with Continuous Valuations
Inefficiency of Equilibria in Query Auctions with Continuous Valuations
Date Written: June 2006
Abstract
We show that, when bidders have continuous valuations, any ex post equilibrium in an ex post individually rational query auction can only be ex post efficient when the running time of the auction is infinite for almost all realizations of valuations of the bidders. We also show that this result applies to the general class of bisection auctions. In contrast we show that, when we allow for inefficient allocations with arbitrarily small probability, there is a query auction (to be more specific, a bisection auction) that attains this level of approximate efficiency in equilibrium, while additionally the running time of the auction in equilibrium is finite for all realizations of valuations.
Keywords: Query acutions, ex post equilibrium, efficiency
JEL Classification: C72, D44
Suggested Citation: Suggested Citation