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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 biddersï¾’ types and possibly interdependent valuations, the sellerï¾’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. 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.
  2. Wolfgang Pesendorfer & Asher Wolinsky, 2003. "Second Opinions and Price Competition: Inefficiency in the Market for Expert Advice," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 417-437, 04.
  3. Dirk Bergemann & Juuso Vaimaki, 2000. "Information Acquisition and Efficient Mechanism Design," Cowles Foundation Discussion Papers 1248, Cowles Foundation for Research in Economics, Yale University.
  4. Asher Wolinsky, 1991. "Competition in a Market for Informed Experts' Services," Discussion Papers 959, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Bergemann, Dirk & Välimäki, Juuso, 2006. "Information in Mechanism Design," CEPR Discussion Papers 5494, C.E.P.R. Discussion Papers.
  6. Weitzman, Martin L, 1979. "Optimal Search for the Best Alternative," Econometrica, Econometric Society, vol. 47(3), pages 641-54, May.
  7. Burguet, Roberto, 1996. "Optimal Repeated Purchases When Sellers Are Learning about Costs," Journal of Economic Theory, Elsevier, vol. 68(2), pages 440-455, February.
  8. Vishwanath, Tara, 1992. "Parallel Search for the Best Alternative," Economic Theory, Springer, vol. 2(4), pages 495-507, October.
  9. Ye Lixin, 2004. "Optimal Auctions with Endogenous Entry," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 4(1), pages 1-29, October.
  10. Gershkov, Alex & Szentes, Balázs, 2009. "Optimal voting schemes with costly information acquisition," Journal of Economic Theory, Elsevier, vol. 144(1), pages 36-68, January.
  11. Preston McAfee, R. & McMillan, John, 1988. "Search mechanisms," Journal of Economic Theory, Elsevier, vol. 44(1), pages 99-123, February.
  12. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June.
  13. Paul Milgrom & Ilya Segal, 2002. "Envelope Theorems for Arbitrary Choice Sets," Econometrica, Econometric Society, vol. 70(2), pages 583-601, March.
  14. Crémer, Jacques & Spiegel, Yossi & Zheng, Charles, 2003. "Optimal Selling Mechanisms wth Costly Information Acquisition," IDEI Working Papers 205, Institut d'Économie Industrielle (IDEI), Toulouse.
  15. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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Citations

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Cited by:
  1. Xianwen Shi, 2007. "Optimal Auctions with Information Acquisition," Working Papers tecipa-302, University of Toronto, Department of Economics.
  2. Pancs, Romans, 2013. "Sequential negotiations with costly information acquisition," Games and Economic Behavior, Elsevier, vol. 82(C), pages 522-543.
  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. Crémer, Jacques & Spiegel, Yossi & Zheng, Charles Zhoucheng, 2007. "Auctions with Costly Information Acquisition," Staff General Research Papers 12709, Iowa State University, Department of Economics.
  5. Crémer, Jacques & Spiegel, Yossi & Zheng, Charles Zhoucheng, 2006. "Optimal Search Auctions with Correlated Bidder Types," Staff General Research Papers 12663, Iowa State University, Department of Economics.
  6. Laurent Lamy, 2010. ""Upping the ante": How to design efficient auctions with entry?," PSE Working Papers halshs-00564888, HAL.
  7. Hagedorn, Marcus, 2009. "The value of information for auctioneers," Journal of Economic Theory, Elsevier, vol. 144(5), pages 2197-2208, September.
  8. Bulow, Jeremy I. & Klemperer, Paul, 2009. "Why Do Sellers (Usually) Prefer Auctions?," CEPR Discussion Papers 7411, C.E.P.R. Discussion Papers.
  9. Gal, Shmuel & Landsberger, Michael & Nemirovski, Arkadi, 2007. "Participation in auctions," Games and Economic Behavior, Elsevier, vol. 60(1), pages 75-103, July.
  10. Laurent Lamy, 2010. ""Upping the ante": How to design efficient auctions with entry?," Working Papers halshs-00564888, HAL.

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