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Bidding among Friends and Enemies with Symmetric Information

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  • David Ettinger

Abstract

We consider an auction setting, in a symmetric information framework, in which bidders, even if they fail to obtain the good, care about the price paid by the winner. We prove that the outcome of the first-price auction is not affected by identity-independent price externalities, while the outcome of the second-price auction is. In contrast, identity-dependent price externalities affect the outcome of both auction formats. In any case, the second-price auction exacerbates the effects of price externalities.

Suggested Citation

  • David Ettinger, 2010. "Bidding among Friends and Enemies with Symmetric Information," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(2), pages 365-385, June.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201006)166:2_365:bafaew_2.0.tx_2-5
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    3. Bos, Olivier, 2016. "Charity auctions for the happy few," Mathematical Social Sciences, Elsevier, vol. 79(C), pages 83-92.

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    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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