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"Upping the ante": How to design efficient auctions with entry?

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  • Laurent Lamy

    (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

Abstract

In the symmetric independent private value model, we revisit auctions with entry by adding two additional ingredients: difficulties to commit to the announced mechanism, in particular not to update the reserve price after bidders took their entry decisions, and seller's ex ante uncertainty on her reservation value which calls for flexibility. Shill bidding or ex post rights to cancel the sale may provide some valuable flexibility in second price auctions. However, both fail to be efficient since the seller may keep the good while it would be efficient to allocate it to the highest bidder. The English auction with jump bids and cancelation rights is shown to implement the first best in large environments. On the positive side, special emphasis is put on the equilibrium analysis of auctions with shill bidding and on a variety of associated new insights including counterintuitive comparative statics and a comparison with posted-prices.

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Bibliographic Info

Paper provided by HAL in its series PSE Working Papers with number halshs-00564888.

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Date of creation: Jun 2010
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Handle: RePEc:hal:psewpa:halshs-00564888

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Keywords: auctions ; auctions with entry ; shill bidding ; commitment failure ; hold-up ; posted-price ; cancelation rights ; jump bids ; bilateral asymmetric information;

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  1. Ruqu Wang & Parimal Kanti Bag & Emim Murat Dinlersoz, 1998. "More on Phantom Bidding," Working Papers, Queen's University, Department of Economics 976, Queen's University, Department of Economics.
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  15. Brown, Jennifer & Morgan, John, 2006. "How much is a Dollar Worth? Tipping versus Equilibrium Coexistence on Competing Online Auction Sites," Competition Policy Center, Working Paper Series, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley qt3c21w91h, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  16. Crémer, Jacques & Spiegel, Yossi & Zheng, Charles, 2005. "Optimal Search Auctions," IDEI Working Papers 293, Institut d'Économie Industrielle (IDEI), Toulouse.
  17. Lucking-Reiley, David, 2000. "Auctions on the Internet: What's Being Auctioned, and How?," Journal of Industrial Economics, Wiley Blackwell, vol. 48(3), pages 227-52, September.
  18. Lamy, Laurent, 2009. "The Shill Bidding Effect versus the Linkage Principle," Journal of Economic Theory, Elsevier, vol. 144(1), pages 390-413, January.
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Cited by:
  1. repec:hal:wpaper:halshs-00586039 is not listed on IDEAS
  2. Lamy, Laurent, 2012. "The econometrics of auctions with asymmetric anonymous bidders," Journal of Econometrics, Elsevier, Elsevier, vol. 167(1), pages 113-132.
  3. Philippe Jehiel & Laurent Lamy, 2011. "Absolute auctions and secret reserve prices: Why are they used?," Levine's Working Paper Archive 786969000000000316, David K. Levine.

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