Abstract
I propose a new mechanism design approach to the problem of ranking standard
auctions with two heterogeneous bidders. A key feature of the approach is that it may
be possible to rank two auctions even if neither dominates the other for all combinations
of types. The approach simplifies the analysis and unifies results in the existing
literature. Roughly speaking, the first-price auction is more profitable than the secondprice
auction when the strong bidder’s distribution is flatter and more disperse than
the weak bidder’s distribution. Applications include auctions with one-sided externalities.
Moreover, contrary to previous work, reserve prices are easily handled. Finally,
the method can be extended to some environments with many bidders.