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Intuitive and noncompetitive equilibria in weakly efficient auctions with entry costs

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  • Miralles, Antonio

Abstract

I study weakly efficient auctions with entry costs, under the IPV assumption, following Tan and Yilankaya [Tan, G., Yilankaya, O., 2006. Equilibria in second price auctions with participation costs. Journal of Economic Theory 130, 205-219]. First, I generalize their Proposition 4 to what I call (generalized) intuitive equilibrium. By such I prove that if bidders' valuation distributions are ordered in a (weak) first order domination ranking, then there exists an equilibrium in cutoff strategies where cutoffs are (weakly) increasingly ordered with respect to the domination ranking. Stronger bidders are thus ex ante more likely to participate. A second result states a necessary and sufficient condition for the existence of a noncompetitive cutoff equilibrium, in which only one bidder (if any) takes part in the auction. Neither the uniform distribution nor any distribution first order stochastically dominated by the uniform may ever satisfy that condition. If both intuitive and nonintuitive equilibria exist, I conjecture that intuitive equilibria tend to yield higher ex ante efficiency, while nonintuitive ones might yield higher expected revenues.

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Bibliographic Info

Article provided by Elsevier in its journal Mathematical Social Sciences.

Volume (Year): 56 (2008)
Issue (Month): 3 (November)
Pages: 448-455

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Handle: RePEc:eee:matsoc:v:56:y:2008:i:3:p:448-455

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Web page: http://www.elsevier.com/locate/inca/505565

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Keywords: Auctions Entry costs Intuitive equilibria Efficiency Revenue;

References

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  1. Guofu Tan & Okan Yilankaya, 2005. "Equilibria in Second Price Auctions with Participation Costs," IEPR Working Papers 05.7, Institute of Economic Policy Research (IEPR).
  2. Campbell, Colin M., 1998. "Coordination in Auctions with Entry," Journal of Economic Theory, Elsevier, vol. 82(2), pages 425-450, October.
  3. Stegeman, Mark, 1996. "Participation Costs and Efficient Auctions," Journal of Economic Theory, Elsevier, vol. 71(1), pages 228-259, October.
  4. Paulo K. Monteiro & Flavio M. Menezes, 2000. "original papers : Auctions with endogenous participation," Review of Economic Design, Springer, vol. 5(1), pages 71-89.
  5. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June.
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Cited by:
  1. Xiaoyong Cao & Guoqiang Tian, 2013. "Second-Price Auctions with Different Participation Costs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(1), pages 184-205, 03.
  2. Antonio Miralles, 2010. "Self-enforced collusion through comparative cheap talk in simultaneous auctions with entry," Economic Theory, Springer, vol. 42(3), pages 523-538, March.
  3. Cao, Xiaoyong & Tian, Guoqiang, 2010. "Equilibria in first price auctions with participation costs," Games and Economic Behavior, Elsevier, vol. 69(2), pages 258-273, July.

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