Entry Coordination And Auction Design With Private Costs Of Information Acquisition
Abstract"Auction design with endogenous entry is complicated by entry coordination among bidders due to multiple entry equilibria issue. This article studies auction design when information acquisition costs are private information of bidders. We show that this problem can be resolved by sufficient dispersion in these costs. First, we find that a simple second-price auction with no entry fee and a reserve price equal to the seller's valuation is ex ante efficient, while a revenue-maximizing auction involves personalized entry fees, which are determined by the hazard rates of their information acquisition cost distribution. Second, we show that sufficient dispersion in the information acquisition costs (more dispersion than a particular uniform distribution by the Bickel-Lehman dispersive order) can coordinate bidders and implement uniquely the desirable entry. The dispersion in information acquisition costs is also necessary for this "unique implementation" result." ("JEL" D44, D82) Copyright (c) 2009 Western Economic Association International.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Economic Inquiry.
Volume (Year): 48 (2010)
Issue (Month): 2 (04)
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Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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- Lu, Jingfeng & Ye, Lixin, 2013. "Efficient and optimal mechanisms with private information acquisition costs," Journal of Economic Theory, Elsevier, vol. 148(1), pages 393-408.
- Konrad, Kai A. & Kovenock, Dan, 2012.
"The lifeboat problem,"
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- Konrad, Kai A. & Kovenock, Dan, 2009. "The Lifeboat Problem," CEPR Discussion Papers 7424, C.E.P.R. Discussion Papers.
- Kai A. Konrad & Dan Kovenock, 2011. "The Lifeboat Problem," Working Papers the_lifeboat_problem, Max Planck Institute for Tax Law and Public Finance.
- Konrad, Kai A. & Kovenock, Dan, 2011. "The lifeboat problem," Discussion Papers, Research Professorship & Project "The Future of Fiscal Federalism" SP II 2011-106, Social Science Research Center Berlin (WZB).
- Xu, Xiaoshu & Levin, Dan & Ye, Lixin, 2013. "Auctions with entry and resale," Games and Economic Behavior, Elsevier, vol. 79(C), pages 92-105.
- Kirkegaard, René, 2012. "Favoritism in asymmetric contests: Head starts and handicaps," Games and Economic Behavior, Elsevier, vol. 76(1), pages 226-248.
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