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Price Reveal Auctions on the Internet

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  • Andrea Gallice

Abstract

A price reveal auction is a Dutch auction in which the current price of the item on sale remains hidden. Bidders can privately observe the price only by paying a fee, and every time a bidder does so, the price falls by a predetermined amount. We show that in equilibrium, no rational bidder should enter into such an auction. Contrary to this prediction, data about actual price reveal auctions run on the Internet show that bidders do enter and that the mechanism is profitable for the seller.

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Bibliographic Info

Paper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number 147.

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Length: 13 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:cca:wpaper:147

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Keywords: price reveal auctions; pay-per-bid auctions;

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References

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  1. Robert �stling & Joseph Tao-yi Wang & Eileen Y. Chou & Colin F. Camerer, 2011. "Testing Game Theory in the Field: Swedish LUPI Lottery Games," American Economic Journal: Microeconomics, American Economic Association, vol. 3(3), pages 1-33, August.
  2. Jürgen Eichberger & Dmitri Vinogradov, 2008. "Least Unmatched Price Auctions: A First Approach," Working Papers 0471, University of Heidelberg, Department of Economics, revised Jul 2008.
  3. Klemperer, Paul, 1999. " Auction Theory: A Guide to the Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 13(3), pages 227-86, July.
  4. Andrea Gallice, 2009. "Lowest Unique Bid Auctions with Signals," Carlo Alberto Notebooks 112, Collegio Carlo Alberto, revised Sep 2009.
  5. Harold Houba & Dinard Laan & Dirk Veldhuizen, 2011. "Endogenous entry in lowest-unique sealed-bid auctions," Theory and Decision, Springer, vol. 71(2), pages 269-295, August.
  6. Amnon Rapoport & Hironori Otsubo & Bora Kim & William E. Stein, 2009. "Unique Bid Auction Games," Jena Economic Research Papers 2009-005, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  7. Brennan C. Platt & Joseph Price & Henry Tappen, 2010. "Pay-to-Bid Auctions," NBER Working Papers 15695, National Bureau of Economic Research, Inc.
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Cited by:
  1. Di Gaetano, Luigi, 2011. "A model of descending auction with hidden starting price and endogenous price decrease," MPRA Paper 35773, University Library of Munich, Germany.

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