Endogenous competition alters the structure of optimal auctions

Arbeitspapier

Potential bidders respond to a seller's choice of auction mechanism for a common-value or affiliated-values asset by endogenous decisions whether to incur an information-acquisition cost (and observe a private estimate), or forgo competing. Privately informed participants decide whether to incur a bid-preparation cost and pay an entry fee, or cease competing. Auction rules and information flows are quite general; participation decisions may be simultaneous or sequential. The resulting revenue identity for any auction mechanism implies that optimal auctions are allocatively efficient; a nontrivial reserve price is revenue-inferior. Optimal auctions are otherwise contentless: any auction that sells without reserve becomes optimal by adjusting any one of the continuous, spanning parameters, e.g., the entry fee. Seller's surplus-extracting tools are now substitutes, not complements. Many econometric studies of auction markets are seen to be flawed in their identification of the number of bidders.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ISER Discussion Paper ; No. 816

Classification and Topics

• Classification: Wirtschaft ; Auctions ; Asymmetric and Private Information; Mechanism Design ; Noncooperative Games
• Subject: optimal auctions ; endegenous bidder participation ; affiliated-values ; common-value auctions ; surplus-extracting devices ; Auktionstheorie ; Asymmetrische Information ; Nichtkooperatives Spiel ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Harstad, Ronald M.
• Event: Veröffentlichung
• (who): Osaka University, Institute of Social and Economic Research (ISER)
• (where): Osaka
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/92866
• Last update: 10.03.2025, 11:46 AM CET