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The ‘Shill Bidding Effect’ Versus the ‘Linkage Principle’

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  • Laurent Lamy

    (Crest)

Abstract

The analysis of second price auctions with externalities is utterlymodied if the seller is unable to commit not to participate in themechanism. For the General Symmetric Model (Milgrom and Weber[20]) and standard auction formats, we charaterize the full set of symmetricpure strategy equilibria with shill bids from the seller (usingpossibly mixed strategy) and compare those equilibria to the optimalone with the ability to commit not to use shill bids. The benets fromthe highlighted 'Linkage Principle' are counterbalanced by the 'ShillBidding Eect' which grows with the winner's curse.

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Bibliographic Info

Paper provided by Centre de Recherche en Economie et Statistique in its series Working Papers with number 2005-35.

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Length: 34
Date of creation: 2005
Date of revision:
Handle: RePEc:crs:wpaper:2005-35

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  1. Professor Paul Klemperer, 2000. "What Really Matters in Auction Design," Microeconomics 0004008, EconWPA.
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  4. Lawrence M. Ausubel, 2004. "An Efficient Ascending-Bid Auction for Multiple Objects," American Economic Review, American Economic Association, vol. 94(5), pages 1452-1475, December.
  5. Tan, Guofu & Yilankaya, Okan, 2004. "Equilibria in Second Price Auctions with Participation Costs," Microeconomics.ca working papers tan-04-01-24-10-08-06, Vancouver School of Economics, revised 09 Jun 2006.
  6. Kenneth Hendricks & Joris Pinkse & Robert H. Porter, 2003. "Empirical Implications of Equilibrium Bidding in First--Price, Symmetric, Common Value Auctions," Review of Economic Studies, Wiley Blackwell, vol. 70(1), pages 115-145, January.
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  16. Jullien, Bruno & Mariotti, Thomas, 2002. "Auction and the Informed Seller Problem," IDEI Working Papers 145, Institut d'Économie Industrielle (IDEI), Toulouse, revised Oct 2004.
  17. Levin, Dan & Kagel, John H & Richard, Jean-Francois, 1996. "Revenue Effects and Information Processing in English Common Value Auctions," American Economic Review, American Economic Association, vol. 86(3), pages 442-60, June.
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  20. Horstmann, I.J. & LaCasse, C., 1995. "Secret Reserve Prices in a Bidding Model with a Re-Sale Option," Working Papers 9507e, University of Ottawa, Department of Economics.
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  24. Motty Perry & Philip J. Reny, 1999. "On The Failure of the Linkage Principle in Multi-Unit Auctions," Econometrica, Econometric Society, vol. 67(4), pages 895-900, July.
  25. Caillaud, Bernard & Mezzetti, Claudio, 2004. "Equilibrium reserve prices in sequential ascending auctions," Journal of Economic Theory, Elsevier, vol. 117(1), pages 78-95, July.
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Citations

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Cited by:
  1. Laurent Lamy, 2010. ""Upping the ante": How to design efficient auctions with entry?," PSE Working Papers halshs-00564888, HAL.
  2. Lamy, Laurent, 2012. "The econometrics of auctions with asymmetric anonymous bidders," Journal of Econometrics, Elsevier, vol. 167(1), pages 113-132.
  3. repec:hal:wpaper:halshs-00564888 is not listed on IDEAS
  4. Philippe Jehiel & Laurent Lamy, 2011. "Absolute auctions and secret reserve prices: Why are they used?," Levine's Working Paper Archive 786969000000000316, David K. Levine.
  5. repec:hal:wpaper:halshs-00586039 is not listed on IDEAS

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