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Auction timing and market thickness

Author

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  • Chaves, Isaías N.
  • Ichihashi, Shota

Abstract

A seller faces a pool of potential bidders that changes over time. She can delay the auction to have a thicker market later on. The seller imposes static distortions (through her choice of reserve prices) and dynamic distortions (through her choice of market thickness). Under a condition on types that generalizes increasing hazard rates, we show that (i) regulating only static distortions can harm efficiency; (ii) when regulating only dynamic distortions, a social planner should reduce market thickness; (iii) if a planner can affect both types of distortions, she should still choose a lower market thickness than the seller, i.e., market thickness is inefficiently high; (iv) the extent of timing disagreement between the seller and a social planner is higher when they both have to use an efficient auction than when they both have to use an optimal one.

Suggested Citation

  • Chaves, Isaías N. & Ichihashi, Shota, 2024. "Auction timing and market thickness," Games and Economic Behavior, Elsevier, vol. 143(C), pages 161-178.
  • Handle: RePEc:eee:gamebe:v:143:y:2024:i:c:p:161-178
    DOI: 10.1016/j.geb.2023.11.006
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    Cited by:

    1. Martino Banchio & Aranyak Mehta & Andres Perlroth, 2024. "Auctions with Dynamic Scoring," Papers 2403.11022, arXiv.org.

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