Standard Auctions with Identity-Dependent Externalities
AbstractI analyze equilibrium bidding behavior in the open ascending-bid auction with identity-dependent externalities. With reciprocal externalities, the allocation is determined by bidders' consumption values alone. With large nonreciprocal externalities, the open auction generates higher expected revenue compared to standard sealed-bid auctions. The progress of the open auction reveals more information about the identity of the potential winner, allowing active bidders greater opportunity to avoid incurring payoff-reducing externalities. The associated option value to staying active up until a relatively high price translates into higher expected revenue. Multiple bidders may sequentially quit at the same price, and relative to sealed-bid auctions, bidders experience less ex post regret.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 33 (2002)
Issue (Month): 4 (Winter)
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- Jacob Goeree & Theo Offerman & Randolph Sloof, 2013.
"Demand reduction and preemptive bidding in multi-unit license auctions,"
Springer, vol. 16(1), pages 52-87, March.
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- Ettinger, David, 2003. "Efficiency in auctions with crossholdings," Economics Papers from University Paris Dauphine 123456789/5448, Paris Dauphine University.
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