The Buy Price in Auctions with Discrete Type Distributions
AbstractThis paper considers second-price, sealed-bid auctions with a buy price where bidders' types are discretely distributed. We characterize all equilibria, restricting our attention to equilibria where bidders whose types are less than a buy price bid their own valuations. Budish and Takeyama (2001) analyzed the two-bidder, two-type framework, and showed that if bidders are risk-averse, a seller can obtain a higher expected revenue from the auction with a certain buy price than from the auction without a buy price. We extend their revenue improvement result to the n-bidder, two-type framework. However, in case of three or more types, bidders' risk aversion is not a sufficient condition for the revenue improvement. Our example illustrates that even if bidders are risk-averse, a seller cannot always obtain a higher expected revenue from the auction with a buy price.
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Bibliographic InfoPaper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 657.
Date of creation: Jul 2008
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More information through EDIRC
Auction; Buy price; Risk aversion;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-20 (All new papers)
- NEP-CTA-2008-07-20 (Contract Theory & Applications)
- NEP-GTH-2008-07-20 (Game Theory)
- NEP-MIC-2008-07-20 (Microeconomics)
- NEP-MKT-2008-07-20 (Marketing)
- NEP-UPT-2008-07-20 (Utility Models & Prospect Theory)
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.:
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