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Optimal Search Auctions

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  • Crémer, Jacques
  • Spiegel, Yossi
  • Zheng, Charles

Abstract

We study the design of profit maximizing single unit auctions under the assumption that the seller needs to incur costs to contact prospective bidders and inform them about the auction. With independent bidders’ types and possibly interdependent valuations, the seller’s problem can be reduced to a search problem in which the surplus is measured in terms of virtual utilities minus search costs. Compared to the socially efficient mechanism, the optimal mechanism features fewer participants, longer search conditional on the same set of participants, and inefficient sequence of entry.

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Bibliographic Info

Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 293.

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Date of creation: Dec 2005
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Publication status: Published in Journal of Economic Theory, vol.�134, mai 2007, p.�226-248.
Handle: RePEc:ide:wpaper:5301

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References

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  1. W. Pesendorfer & A. Wolinsky, 2000. "Second Opinions and Price Competition: Inefficiency in the Market for Expert Advice," Princeton Economic Theory Papers 00s18, Economics Department, Princeton University.
  2. David Pérez-Castrillo & Marilda Sotomayor, 2003. "A Selling Mechanism," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 57(4), pages 931-952, October.
  3. M. L. Weitzman, 1978. "Optimal Search for the Best Alternative," Working papers 214, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Crémer, Jacques & Spiegel, Yossi & Zheng, Charles, 2003. "Optimal Selling Mechanisms wth Costly Information Acquisition," IDEI Working Papers 205, Institut d'Économie Industrielle (IDEI), Toulouse.
  5. Dirk Bergemann & Juuso Valimaki, 2005. "Information in Mechanism Design," Cowles Foundation Discussion Papers 1532, Cowles Foundation for Research in Economics, Yale University.
  6. Asher Wolinsky, 1993. "Competition in a Market for Informed Experts' Services," RAND Journal of Economics, The RAND Corporation, vol. 24(3), pages 380-398, Autumn.
  7. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. Ye Lixin, 2004. "Optimal Auctions with Endogenous Entry," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 4(1), pages 1-29, October.
  9. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June.
  10. Dirk Bergemann & Juuso Vaimaki, 2000. "Information Acquisition and Efficient Mechanism Design," Cowles Foundation Discussion Papers 1248, Cowles Foundation for Research in Economics, Yale University.
  11. Paul Milgrom & Ilya Segal, 2002. "Envelope Theorems for Arbitrary Choice Sets," Econometrica, Econometric Society, vol. 70(2), pages 583-601, March.
  12. Vishwanath, Tara, 1992. "Parallel Search for the Best Alternative," Economic Theory, Springer, vol. 2(4), pages 495-507, October.
  13. Alex Gershkov & Balazs Szentes, 2004. "Optimal Voting Schemes with Costly Information Acquisition," NajEcon Working Paper Reviews 122247000000000311, www.najecon.org.
  14. Preston McAfee, R. & McMillan, John, 1988. "Search mechanisms," Journal of Economic Theory, Elsevier, vol. 44(1), pages 99-123, February.
  15. Burguet, Roberto, 1996. "Optimal Repeated Purchases When Sellers Are Learning about Costs," Journal of Economic Theory, Elsevier, vol. 68(2), pages 440-455, February.
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Citations

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Cited by:
  1. Jacques Crémer & Yossi Spiegel & Charles Zheng, 2009. "Auctions with costly information acquisition," Economic Theory, Springer, vol. 38(1), pages 41-72, January.
  2. Cremer, Jacques & Spiegel, Yossi & Zheng, Charles Z., 2006. "Optimal search auctions with correlated bidder types," Economics Letters, Elsevier, vol. 93(1), pages 94-100, October.
  3. Szech, Nora, 2011. "Optimal disclosure of costly information packages in auctions," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 462-469.
  4. Gal, Shmuel & Landsberger, Michael & Nemirovski, Arkadi, 2007. "Participation in auctions," Games and Economic Behavior, Elsevier, vol. 60(1), pages 75-103, July.
  5. Laurent Lamy, 2013. "“Upping the ante”: how to design efficient auctions with entry?," RAND Journal of Economics, RAND Corporation, vol. 44(2), pages 194-214, 06.
  6. Jeremy Bulow & Paul Klemperer, 2009. "Why Do Sellers (Usually) Prefer Auctions?," American Economic Review, American Economic Association, vol. 99(4), pages 1544-75, September.
  7. Shi, Xianwen, 2012. "Optimal auctions with information acquisition," Games and Economic Behavior, Elsevier, vol. 74(2), pages 666-686.
  8. repec:hal:wpaper:halshs-00564888 is not listed on IDEAS
  9. Hagedorn, Marcus, 2009. "The value of information for auctioneers," Journal of Economic Theory, Elsevier, vol. 144(5), pages 2197-2208, September.
  10. Pancs, Romans, 2013. "Sequential negotiations with costly information acquisition," Games and Economic Behavior, Elsevier, vol. 82(C), pages 522-543.

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