Many studies have found a gap between willingness-to-pay and willingness-to-accept that is inconsistent with standard theory. There is also evidence that the gap is eroded by experience gained in the laboratory and naturally occurring markets. This paper argues that the gap and the effects of...

We consider second-price and first-price auctions in the symmetric independent private values framework. We modify the standard model by the assumption that the bidders have reference-based utility, where a publicly announced reserve price has some influence on the reference point. It turns out...

We examine the rate of convergence to efficiency in the buyer?s bid double auction for sequences of markets in which the number m of buyers can be arbitrarly larger than the number n of sellers. This rate is shown to be O(n/m2) when m, n are such that m*_ for a constant _ 1. This is consistent...

Under contractual incompleteness, a bid-taker is obliged to depend on a self-enforcing contract where a winning bidder puts his reputation at stake. In this case the winning bidder will renege on contractual obligations if any one-shot gain from opportunism is greater than a long-term gain from...

We study optimal auctions with expectation-based loss-averse bidders. We first consider when bidders are ex-ante identical. Although symmetric designs are optimal for bidders with expected-utility preferences, if the degree of loss aversion is sufficiently large relative to the variation in...

In explaining the winner’s curse, recent approaches have focused on one of two cognitive processes: conditional reasoning and belief formation. We provide the first joint experimental analysis of the role of these two obstacles. First, we observe that overbidding decreases significantly...

In light of recent developments in auction theory, this Article re-examines Delaware corporate law governing directors' actions when structuring the sale of a corporation. A foundational doctrine of Delaware law is that when the board of directors resolves to sell a corporation, it must obtain...

Fees are omnipresent in markets but, with few exceptions, are omitted in economic models-such as Double Auctions-of these markets. Allowing for general fee structures, we show that their impact on incentives and efficiency in large Double Auctions hinges on whether the fees are homogeneous (as,...

Governments and corporations frequently auction assets with embedded real options using both cash and contingent bids. I characterize equilibrium bidding and option exercise strategies, and find that the moral hazard associated with uncontractible investment timing inefficiently and...

We study the optimal auction design problem when bidders' preferences follow the maxmin expected utility model. We suppose that the bidders' set of priors consists of beliefs "close" to the seller's belief, where "closeness" is defined by a divergence. For a given allocation rule, we identify a...