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Optimal Search Auctions

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Author Info
Cremer, Jaques
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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Publisher Info
Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12662.

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Length: 32 pages
Date of creation: 24 Aug 2006
Date of revision:
Publication status: Published in Journal of Economic Theory, May 2007, Vol. 134, No. 1, pp. 226-248.
Handle: RePEc:isu:genres:12662

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Related research
Keywords: Optimal auction; Participation cost; Search procedure;

Find related papers by JEL classification:
D4 - Microeconomics - - Market Structure and Pricing

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Burguet, Roberto, 1996. "Optimal Repeated Purchases When Sellers Are Learning about Costs," Journal of Economic Theory, Elsevier, vol. 68(2), pages 440-455, February. [Downloadable!] (restricted)
  2. Paul Milgrom & Ilya Segal, 2002. "Envelope Theorems for Arbitrary Choice Sets," Econometrica, Econometric Society, vol. 70(2), pages 583-601, March. [Downloadable!] (restricted)
  3. Preston McAfee, R. & McMillan, John, 1988. "Search mechanisms," Journal of Economic Theory, Elsevier, vol. 44(1), pages 99-123, February. [Downloadable!] (restricted)
  4. Weitzman, Martin L, 1979. "Optimal Search for the Best Alternative," Econometrica, Econometric Society, vol. 47(3), pages 641-54, May. [Downloadable!] (restricted)
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  5. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  6. Dirk Bergemann & Juuso Valimaki, 2002. "Information Acquisition and Efficient Mechanism Design," Econometrica, Econometric Society, vol. 70(3), pages 1007-1033, May. [Downloadable!] (restricted)
    Other versions:
  7. 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. [Downloadable!] (restricted)
  8. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June. [Downloadable!] (restricted)
  9. repec:bep:thecon:v:4:y:2004:i:1:p:1158-1158 is not listed on IDEAS
  10. Dirk Bergemann & Juuso Valimaki, 2005. "Information in Mechanism Design," Cowles Foundation Discussion Papers 1532R, Cowles Foundation, Yale University, revised Jan 2006. [Downloadable!]
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  11. Wolfgang Pesendorfer & Asher Wolinsky, 2003. "Second Opinions and Price Competition: Inefficiency in the Market for Expert Advice," Review of Economic Studies, Blackwell Publishing, vol. 70(2), pages 417-437, 04. [Downloadable!] (restricted)
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  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. [Downloadable!]
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  1. Crémer, Jacques & Spiegel, Yossi & Zheng, Charles Zhoucheng, 2007. "Auctions with Costly Information Acquisition," Staff General Research Papers 12709, Iowa State University, Department of Economics.
    Other versions:
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