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Standard Auctions with Identity Dependent Externalities

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  • Gopal Das Varma

    (Duke University)

Abstract

We analyze equilibrium bidding behavior in a three bidder open ascending bid auction with identity dependent externalities. We prove the existence of a unique symmetric equilibrium and then show that for sufficiently large externalities, the open auction yields strictly higher expected revenues compared to a sealed bid auction. An open auction reveals to bidders more payoff relevant information than a sealed bid auction and as a consequence, bidders are shown to have a higher willingness to pay in the early rounds of an open auction. The open auction is also shown to be more efficient than the sealed bid auction.

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  • Gopal Das Varma, 2000. "Standard Auctions with Identity Dependent Externalities," Econometric Society World Congress 2000 Contributed Papers 1145, Econometric Society.
    • Handle: RePEc:ecm:wc2000:1145
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    References listed on IDEAS

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    Cited by:

    1. Ausubel Lawrence M & Milgrom Paul R, 2002. "Ascending Auctions with Package Bidding," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 1(1), pages 1-44, August.
    2. Lawrence M. Ausubel & Paul Milgrom, 2004. "Ascending Proxy Auctions," Discussion Papers 03-035, Stanford Institute for Economic Policy Research.

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