Discriminating Bidders Boost Efficiency in Auctions, Revolutionizing Resource Allocation
Auctioning scarce resources like radio spectrum can lead to inefficient outcomes due to competition effects. Even with only 2 bidders, auctions may not result in efficient resource allocation. Discriminating bidders by adjusting bid weights can improve auction efficiency, especially when firms differ in market share. This approach can lead to better outcomes for both bidders and society.