Customer Reviews

Auction Theory

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This is the best auction _theory_ book.
Any PhD student in economics or coorporate finance
should read it. Notice that if you are ONLY interested in
real-life auctions and not on the game theory behind
auction theory this book is not for you.

This is a fabulous book for quickly uploading the central insights of the vast literature on the economics of auction design. Results are stated precisely and proven, often with an eye for developing intuition and an understanding of technique. The book can be read from cover to cover or dipped into as required. I find it an extremely useful aid to research.
Highly recommended.

A balance between rigor and intuition. The book contains complete and clear proofs of almost all propositions and many- many fully-worked examples to reinforce intuition. The "chapter notes" provide with plenty further reading and the seven appendices at the end of the book cover lots of essential background. For those who are interested in auction theory and seek a rigorous treatment that at the same time is not intimidating, I highly recommend this book. After all, as Vijay Krishna states in the preface, "...the book is intended to be a conversation between the author and the reader".

The book is separated into two parts. The first part contain single object auction. It begins with the basics in auction theory. The first and second price auctions. The equilibrium is derived from a mathematical model. The theoretical model is based on the revenue equivalence principle. The theorem says that under the right conditions the first price and second price auction leads to the same efficient results. If you relax the assumptions, the first price and second price auctions leads to different revenue results. He explains that the risk aversion and asymmetric bidders leads to more revenue in the first price auction. This result shows inefficiencies from the auction design. In the next section the question is about the mechanism of the auction design. The auction must hold the revelation principle and the auction must be incentive compatible. If both of them hold the auction is the better instrument for allocation than negotiation. An auction with independent values leads to the relaxation of the assumptions of private values. The signal of the selling price is revealed during the auction. This leads to the following result that the English auction is ranked before the second price and first price auction. The English auction is efficient when the highest bidder wins the auction. This is revealed in the average crossing condition. The first part closes with collusion in the auction. The proofs are more mathematical.
The second part is about multiple object auctions- It begins with sealed bid auction which includes the discriminatory, uniform price and Vickrey auction. The open auctions are the Dutch, English and Ausubel auction. They are compared to each other and related to the single object auction. The efficiency and revenue comparison is tested again. Some special cases of sequential auctions, no identical items and signals are discussed.
You need some preliminary work to read the book. The basics in game theory and a good understanding in the mechanism of auctions are needed. The book itself is very mathematical. You get lost in the proofs and theorems when you didn't know the basics. If you are a beginner in auctions than it is better to turn to a normal book in game theory. It helps you more than this book.

This is a very good book on the topic, but we need a "Dummies" version. Auctions are becoming a part of everyday life -- been on EBay lately? Played the stock market? I wish Dr. Krishna had a version of this material without the rigorous math that I could in an undergrad course.