DP21116 First-Price Principle and the Failure of Revenue Equivalence

Ana Maria Rus

We show that first-price auctions can maximize a wide variety of objectives, including revenue, welfare, bidder surplus, and equality, while second-price (or ascending) auctions do not maximize revenue except in Myerson’s regular case. This stark contrast between canonical auction pricing rules qualifies the celebrated revenue equivalence. Furthermore, the optimality of first-price auctions does not hinge on any distributional assumptions, which enables us to analyze problems that are beyond