A Practical Approach on Revenue Equivalence Theorem

Afsal K, Sainul Abideen, Dr. V Kabeer

Abstract: The emergence of internet has made auctions very popular where people can request for bids via the internet from a wide range of buyers and for a large number of commodities. We aim to study the equivalences of the revenue generated for the seller by the four basic auction types - English auction, Dutch auction, First price sealed-bid and Second price sealed-bid auctions - as stated by the Revenue Equivalence Theorem. We empirically verify the results of the theorem through various experiments. Since all the benchmark conditions rarely hold together in real world, some auctions may yield better revenue than some others. We, therefore, analyse the auctions by violating some of the benchmark assumptions so as to simulate the real world scenario.

Keywords: Revenue equivalence theorem, Types of auctions, RET, Experiments on Revenue equivalence theorem, Practical approach on Rev- enue equivalence theorem