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Risk Aversion and Auction Design: Theoretical and Empirical Evidence
Published in International Journal of Industrial Organization, 2021
With Shoshana Vasserman. Auctions are inherently risky: bidders face uncertainty about their prospects of winning and payments, while sellers are unsure about revenue and chances of a successful sale. Auction rules influence the allocation of risk among agents and the behavior of risk-averse bidders, leading to a breakdown of payoff and revenue equivalence and a heightened significance of auction design decisions by sellers. In this paper, we review the literature on risk aversion in auctions, with an emphasis on what can be learned about auction design from theoretical modeling and empirical studies. We survey theoretical results relating to the behavior of risk-averse agents in auctions, the comparison of standard auction formats in the presence of risk aversion and implications for auction design. We discuss standard and more recent approaches to identifying risk preferences in empirical studies and evidence for the significance of risk aversion in auction applications. Finally, we identify areas where existing evidence is relatively scant and ask what questions empirical research might ask given the theory and where further theoretical research may be beneficial given existing empirical results.
Recommended citation: Vasserman, S. and Watt, M. (2021). "Risk Aversion and Auction Design: Theoretical and Empirical Evidence." International Journal of Industrial Organization. 79(102758). https://doi.org/10.1016/j.ijindorg.2021.102758
talks
teaching
UQ Mathematics
Casual Academic (Tutor), University of Queensland, Department of Mathematics, 2009
I was a tutor (teaching assistant) for a number of undergraduate mathematics courses at The University of Queensland, including functional analysis and calculus courses.
UQ Economics
Casual Academic (Tutor), University of Queensland, School of Economics, 2013
I was a tutor (teaching assistant) for two masters-level microeconomics and macroeconomics courses at The University of Queensland.
Harvard Kennedy School
Teaching Fellow and Course Assistant, Harvard Kennedy School, 2017
I was a teaching fellow for introductory economics and game theory courses for Masters students at Harvard Kennedy School, for which I was awarded Harvard Kennedy School’s Dean’s Award for Excellence in Student Teaching.
Stanford University
Teaching Assistant, Stanford University, 2020
I was a teaching assistant for undergraduate market design and PhD microeconomics at Stanford University, for which I was awarded Stanford University’s Centennial Teaching Assistant Award.
Stanford University
Instructor, Stanford University, 2022
I was the instructor for the 2022 math camp for incoming economics PhD students (and other interested students) at Stanford University. This involved twenty two-hour sessions, with material including logic and sets, linear algebra, real analysis, introductory measure theory, convex analysis, static optimization, ordinary differential equations and optimal control theory.