Internet Auctions for Close Substitutes
Description
Economists agree that eBays auction design is sensible and potentially welfare-maximizing for the trade of collectibles, which are unique and idiosyncratic. For mainstream goods, which have close but imperfect substitutes (cars, cameras, computers, clothes), the case is less clear.
Budish is working on several projects in this area. The first examines the efficiency and revenue consequences of using sequential auctions (eBay) rather than simultaneous auctions to allocate closely related goods. The second examines the impact of small participation costs for bidders on auction outcomes. The third proposes an alternate internet auction design for goods with close substitutes. The new design is being tested experimentally with colleagues at HBS, and raises computer systems issues being explored with colleagues in Harvards computer science department.