1. welcome and introduction Peter Bardsley auctions: theory, evidence, policy

2. this workshop second in a series of workshops prepared by the University of Melbourne for the VPS part of an ongoing capacity building partnership level is intermediate –participation in previous workshop is desirable but not essential –we are aware that the audience is very mixed –if it starts to look complicated, hang in there – there will be something for everybody

3. the objectives to introduce and illustrate some of the basic ideas of auction theory to show how these ideas can be tested, explored and refined in the laboratory to show how these ideas are applied to policy design to work in the simplest possible environment to illustrate these concepts –independent private values model –more complex environments (common values, asymmetric bidders, multiple objects, combinatorial and package auctions) will be mentioned briefly

4. buying or selling? auctions can be used to sell something, or to buy something –procurement auctions, sometimes called reverse auctions the theory is completely symmetrical we will usually talk about selling objects –the application to procurement auctions is immediate: just change some words around

5. what do we want allocation mechanisms to achieve? match buyers and sellers price discovery / terms of trade efficient allocation of resources –voluntary exchange makes both parties better off –are their any gains from trade that are missed? is there any money left lying on the table? –speed, efficiency, transparency, low transaction costs maximal revenue, if we are selling; minimal cost, if we are buying robustness: the mechanism should work well in a range of environments

6. a variety of mechanisms beauty parades, negotiated deals unstructured pit markets –village market –some stock exchanges intermediated markets –intermediary holds inventory, bears risk, stands between buyer and seller –stock exchange specialists, supermarkets, used car dealers posted price markets –most shops –Sydney versus Melbourne house market search markets –haggling in bazaars –job markets (executives, plumbers,...) auctions of many forms

7. why study auctions? wide range of design choices tend to be highly efficient well suited to situations with a single seller or a single buyer can be shown to be optimal in many environments

8. first reactions what strategies did you follow when you were bidding? –what strategies do you think other people were following? should you reveal your private information? –should you bid your full value? –can you rely on others being truthful? which institutions are more profitable for the auctioneer?

9. how to get the most out of this workshop: three key questions 1.how does auction design affect behaviour? –how aggressively do participants bid? 2.how does auction design affect performance? –revenue raise –efficiency of allocation 3.when are apparently different institutions actually very similar? –when are apparently similar institutions actually very different?