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Optimal Search Auctions

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Author Info
Jacques Cremer
Yossi Spiegel
Charles Z. Zheng

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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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File URL: http://www.kellogg.northwestern.edu/research/math/papers/1421.pdf
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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1421.

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Date of creation: Aug 2005
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Handle: RePEc:nwu:cmsems:1421

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Keywords: optimal auctions; search cost; search mechanism;

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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. 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.
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  6. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  7. Dirk Bergemann & Juuso Valimaki, 2002. "Information Acquisition and Efficient Mechanism Design," Econometrica, Econometric Society, vol. 70(3), pages 1007-1033, May. [Downloadable!] (restricted)
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  8. 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)
  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. [Downloadable!] (restricted)
  10. Lixin Ye, 2004. "Optimal Auctions with Endogenous Entry," Contributions to Theoretical Economics, Berkeley Electronic Press, vol. 4(1), pages 1158-1158. [Downloadable!] (restricted)
  11. 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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  12. Vishwanath, Tara, 1992. "Parallel Search for the Best Alternative," Economic Theory, Springer, vol. 2(4), pages 495-507, October.
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Cited by:
(explanations, 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. Jacques Crémer & Yossi Spiegel & Charles Zheng, 2009. "Auctions with costly information acquisition," Economic Theory, Springer, vol. 38(1), pages 41-72, January. [Downloadable!] (restricted)
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  2. Celik, Gorkem & Yilankaya, Okan, 2005. "Optimal Auctions with Simultaneous and Costly Participation," Micro Theory Working Papers celik-05-05-09-03-55-40, Microeconomics.ca Website, revised 09 Jun 2006. [Downloadable!]
    Other versions:
  3. Cremer, Jacques & Spiegel, Yossi & Zheng, Charles, 2006. "Optimal Search Auctions with Correlated Bidder Types," Staff General Research Papers 12663, Iowa State University, Department of Economics.
    Other versions:
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