Auctions with Financial Externalities

Arbeitspapier

We study sealed-bid auctions with financial externalities, i.e., auctions in which losers' utilities depend on how much the winner pays. In the unique symmetric equilibrium of the first-price sealed-bid auction (FPSB), larger financial externalities result in lower bids and in a lower expected revenue. The unique symmetric equilibrium of the second-price sealed-bid auction (SPSB) reveals ambiguous effects. We further show that a resale market does not have an effect on the equilibrium bids and that FPSB yields a lower expected revenue than SPSB. With a reserve price, we find an equilibrium for FPSB that involves pooling at the reserve price. For SPSB we derive a necessary and sufficient condition for the existence of a weakly separating equilibrium, and give an expression for the equilibrium.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Nota di Lavoro ; No. 30.2003

Classification and Topics

• Classification: Wirtschaft ; Auctions
• Subject: Auctions ; financial externalities ; reserve price ; resale market ; Auktionstheorie ; Externer Effekt ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Maasland, Emiel ; Onderstal, Sander
• Event: Veröffentlichung
• (who): Fondazione Eni Enrico Mattei (FEEM)
• (where): Milano
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/118057
• Last update: 10.03.2025, 11:44 AM CET