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The Shill Bidding Effect versus the Linkage Principle

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  • Lamy, Laurent

Abstract

The analysis of second price auctions with externalities is utterly modified if the seller is unable to commit not to participate in the mechanism. For the General Symmetric Model introduced by Milgrom and Weber [P. Milgrom, R. Weber, A theory of auctions and competitive bidding, Econometrica 50 (1982) 1089-1122] we characterize the full set of separating equilibria that are symmetric among buyers and with a strategic seller being able to bid in the same way as any buyer through a so-called shill bidding activity. The revenue ranking between first and second price auctions is different from the one arising in Milgrom and Weber: the benefits from the highlighted 'Linkage Principle' are counterbalanced by the 'Shill Bidding Effect.'

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 144 (2009)
Issue (Month): 1 (January)
Pages: 390-413

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Handle: RePEc:eee:jetheo:v:144:y:2009:i:1:p:390-413

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Web page: http://www.elsevier.com/locate/inca/622869

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Keywords: Auctions Externalities Linkage Principle Shill bidding;

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References

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Cited by:
  1. Philippe Jehiel & Laurent Lamy, 2011. "Absolute auctions and secret reserve prices: Why are they used?," Levine's Working Paper Archive 786969000000000316, David K. Levine.
  2. Laurent Lamy, 2008. "The econometrics of auctions with asymmetric anonymous bidders," PSE Working Papers halshs-00586039, HAL.
  3. Laurent Lamy, 2013. "“Upping the ante”: how to design efficient auctions with entry?," RAND Journal of Economics, RAND Corporation, vol. 44(2), pages 194-214, 06.
  4. repec:hal:wpaper:halshs-00564888 is not listed on IDEAS
  5. repec:hal:wpaper:halshs-00586039 is not listed on IDEAS

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