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Auction Design without Commitment

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  • Hannu Vartiainen

    (Yrjö Jahnsson Foundation and University of Helsinki, Finland)

Abstract

We study auction design when parties cannot commit themselves to the mechanism. The seller may change the rules of the game and the buyers choose their outside option at all stages. We assume that the seller has a leading role in equilibrium selection at any stage of the game. Stationary equilibria are characterized in the language of vonNeumann-Morgenstern stable sets. This simplifies the analysis remarkably. In the one buyer case, we obtain the Coase conjecture: the buyer obtains all the surplus and efficiency is reached. However, in the multiple buyer case the seller can achieve more: she is able to commit to the English auction. Typically the converse also holds, the English auction is the only stable auction mechanism.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2003.24.

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Date of creation: Mar 2003
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Handle: RePEc:fem:femwpa:2003.24

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Keywords: Auction theory; commitment; stable sets;

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Cited by:
  1. David McAdams & Michael Schwarz, 2007. "Credible Sales Mechanisms and Intermediaries," American Economic Review, American Economic Association, vol. 97(1), pages 260-276, March.
  2. Chia-Hui Chen & Junichiro Ishida, 2013. "Auctions Versus Negotiations: The Role of Price Discrimination," ISER Discussion Paper 0873, Institute of Social and Economic Research, Osaka University.
  3. Vasiliki Skreta, 2010. "Optimal Auction Design under Non-Commitment," Levine's Working Paper Archive 506439000000000176, David K. Levine.
  4. Leonardo Rezende, 2009. "Biased procurement auctions," Economic Theory, Springer, vol. 38(1), pages 169-185, January.
  5. Todd R. Kaplan & Shmuel Zamir, 2014. "Advances in Auctions," Discussion Paper Series dp662, The Center for the Study of Rationality, Hebrew University, Jerusalem.
  6. Qingmin Liu & Konrad Mierendorff & Xianwen Shi, 2013. "Auctions with Limited Commitment," Working Papers tecipa-504, University of Toronto, Department of Economics.
  7. Lamping, Jennifer, 2008. "The Value of Commitment in Auctions with Matching," MPRA Paper 24373, University Library of Munich, Germany.

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