Revenue Equivalence

Revenue Equivalence is an economic theory stating that, under certain conditions, different mechanisms for selling a good or service will lead to the same expected income for the seller, assuming all bidders and buyers act rationally. For example, whether items are sold through auctions or fixed prices, the total revenue remains consistent if certain factors like bidder risk and information are similar. The concept helps economists understand how different market strategies affect revenue, guiding sellers in choosing the most effective approach to maximize their earnings.