IDEAS home Printed from https://ideas.repec.org/a/gam/jgames/v13y2022i5p62-d918331.html
   My bibliography  Save this article

Second-Price Auctions with Private Entry Costs

Author

Listed:
  • Todd Kaplan

    (Department of Economics, University of Haifa, Haifa 3498838, Israel
    Department of Economics, University of Exeter, Exeter EX4 4PU, UK)

  • Aner Sela

    (Department of Economics, Ben Gurion University of the Negev, Beer-Sheva 8410501, Israel)

Abstract

We study asymmetric second-price auctions under incomplete information. The bidders have two potentially different, commonly known, valuations for the object and private information about their entry costs. The seller, however, does not benefit from these entry costs. We calculate the equilibrium strategies of the bidders and analyze the optimal design for the seller in this environment in terms of expected entry and the number of potential bidders.

Suggested Citation

  • Todd Kaplan & Aner Sela, 2022. "Second-Price Auctions with Private Entry Costs," Games, MDPI, vol. 13(5), pages 1-14, September.
    • Handle: RePEc:gam:jgames:v:13:y:2022:i:5:p:62-:d:918331
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2073-4336/13/5/62/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2073-4336/13/5/62/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kaplan, Todd, et al, 2002. "All-Pay Auctions with Variable Rewards," Journal of Industrial Economics, Wiley Blackwell, vol. 50(4), pages 417-430, December.
    2. Tan, Guofu & Yilankaya, Okan, 2006. "Equilibria in second price auctions with participation costs," Journal of Economic Theory, Elsevier, vol. 130(1), pages 205-219, September.
    3. Xiaoyong Cao & Guofu Tan & Guoqiang Tian & Okan Yilankaya, 2018. "Equilibria in second-price auctions with private participation costs," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(2), pages 231-249, March.
    4. Jacques Crémer & Yossi Spiegel & Charles Zheng, 2009. "Auctions with costly information acquisition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(1), pages 41-72, January.
    5. Todd Kaplan & Israel Luski & Aner Sela & David Wettstein, 2002. "All–Pay Auctions with Variable Rewards," Journal of Industrial Economics, Wiley Blackwell, vol. 50(4), pages 417-430, December.
    6. Thomas, Charles J., 2002. "The effect of asymmetric entry costs on Bertrand competition," International Journal of Industrial Organization, Elsevier, vol. 20(5), pages 589-609, May.
    7. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, March.
    8. Kevin Lang & Robert W. Rosenthal, 1991. "The Contractors' Game," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 329-338, Autumn.
    9. Todd R. Kaplan & Shmuel Zamir, 2001. "A Note on Revenue Effects of Asymmetry in Private-Value Auctions," Discussion Papers 0110, University of Exeter, Department of Economics.
    10. Richard J. Gilbert & Paul Klemperer, 2000. "An Equilibrium Theory of Rationing," RAND Journal of Economics, The RAND Corporation, vol. 31(1), pages 1-21, Spring.
    11. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    12. Jingfeng Lu, 2009. "Auction design with opportunity cost," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(1), pages 73-103, January.
    13. Elberfeld, Walter & Wolfstetter, Elmar, 1999. "A dynamic model of Bertrand competition with entry," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 513-525, May.
    14. Samuelson, William F., 1985. "Competitive bidding with entry costs," Economics Letters, Elsevier, vol. 17(1-2), pages 53-57.
    15. McAfee, R. Preston & McMillan, John, 1987. "Auctions with entry," Economics Letters, Elsevier, vol. 23(4), pages 343-347.
    16. Smith, James L. & Levin, Dan, 1996. "Ranking Auctions with Risk Averse Bidders," Journal of Economic Theory, Elsevier, vol. 68(2), pages 549-561, February.
    17. Nicola Persico, 2000. "Information Acquisition in Auctions," Econometrica, Econometric Society, vol. 68(1), pages 135-148, January.
    18. Stegeman, Mark, 1996. "Participation Costs and Efficient Auctions," Journal of Economic Theory, Elsevier, vol. 71(1), pages 228-259, October.
    19. 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, March.
    20. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-599, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sela, Aner & Kaplan, Todd, 2003. "Auctions with Private Entry Costs," CEPR Discussion Papers 4080, C.E.P.R. Discussion Papers.
    2. Jingfeng Lu, 2010. "Entry Coordination And Auction Design With Private Costs Of Information Acquisition," Economic Inquiry, Western Economic Association International, vol. 48(2), pages 274-289, April.
    3. Xiaoyong Cao & Guofu Tan & Guoqiang Tian & Okan Yilankaya, 2018. "Equilibria in second-price auctions with private participation costs," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(2), pages 231-249, March.
    4. Xiaogang Che & Tilman Klumpp, 2023. "Auctions versus sequential mechanisms when resale is allowed," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(4), pages 1207-1245, May.
    5. Jinhyuk Lee & Jaeok Park, 2016. "Second-price auctions with sequential and costly participation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 62(3), pages 567-586, August.
    6. Diego Aycinena & Lucas Rentschler, 2018. "Auctions with endogenous participation and an uncertain number of bidders: experimental evidence," Experimental Economics, Springer;Economic Science Association, vol. 21(4), pages 924-949, December.
    7. 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.
    8. 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.
    9. Bernhardt, Dan & Liu, Tingjun & Sogo, Takeharu, 2020. "Costly auction entry, royalty payments, and the optimality of asymmetric designs," Journal of Economic Theory, Elsevier, vol. 188(C).
    10. Xu, Xiaoshu & Levin, Dan & Ye, Lixin, 2013. "Auctions with entry and resale," Games and Economic Behavior, Elsevier, vol. 79(C), pages 92-105.
    11. Jingfeng Lu, 2009. "Why a Simple Second-Price Auction Induces Efficient Endogenous Entry," Theory and Decision, Springer, vol. 66(2), pages 181-198, February.
    12. Xin Feng, 2023. "Information disclosure in all-pay contests with costly entry," International Journal of Game Theory, Springer;Game Theory Society, vol. 52(2), pages 401-421, June.
    13. Celik Gorkem & Yilankaya Okan, 2009. "Optimal Auctions with Simultaneous and Costly Participation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-33, July.
    14. Levin, Dan & Ozdenoren, Emre, 2004. "Auctions with uncertain numbers of bidders," Journal of Economic Theory, Elsevier, vol. 118(2), pages 229-251, October.
    15. Lorentziadis, Panos L., 2016. "Optimal bidding in auctions from a game theory perspective," European Journal of Operational Research, Elsevier, vol. 248(2), pages 347-371.
    16. Xin Feng & Jingfeng Lu & Yeneng Sun, 2020. "Ex Ante Efficient Mechanism With Private Entry Costs," Economic Inquiry, Western Economic Association International, vol. 58(3), pages 1531-1541, July.
    17. Fan, Cuihong & Wolfstetter, Elmar, 2008. "Procurement with costly bidding, optimal shortlisting, and rebates," Economics Letters, Elsevier, vol. 98(3), pages 327-334, March.
    18. Jingfeng Lu, 2009. "Auction design with opportunity cost," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(1), pages 73-103, January.
    19. Hu, Audrey & Offerman, Theo & Zou, Liang, 2011. "Premium auctions and risk preferences," Journal of Economic Theory, Elsevier, vol. 146(6), pages 2420-2439.
    20. Jehiel, Philippe & Lamy, Laurent, 2014. "On discrimination in procurement auctions," CEPR Discussion Papers 9790, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    asymmetric auctions; entry costs;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jgames:v:13:y:2022:i:5:p:62-:d:918331. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.