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Auctioning with Aspirations: Keep Them Low (Enough)

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Author Info
Shunda, Nicholas

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Abstract

In an auction with a buy price, a seller offers bidders the opportunity to forgo competing in an auction by transacting immediately at a pre-specified fixed price. If a seller has aspirations in the form of a reference price that depends upon the auction's reserve price and buy price, she does best to keep her aspirations sufficiently low by designing a no-reserve auction with a buy price low enough that some bidder types would exercise it with positive probability in equilibrium. The seller is indifferent between the auction component of her mechanism being a first- or second-price auction.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 16242.

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Date of creation: 13 Jul 2009
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Handle: RePEc:pra:mprapa:16242

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Related research
Keywords: Auction; Aspiration; Buy price; Internet; Reference-dependence;

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Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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  1. Stanley Reynolds & John Wooders, 2009. "Auctions with a buy price," Economic Theory, Springer, vol. 38(1), pages 9-39, January. [Downloadable!] (restricted)
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  2. Timothy Mathews & Brett Katzman, 2006. "The role of varying risk attitudes in an auction with a buyout option," Economic Theory, Springer, vol. 27(3), pages 597-613, 04. [Downloadable!] (restricted)
  3. Milgrom, Paul, 1989. "Auctions and Bidding: A Primer," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 3-22, Summer. [Downloadable!] (restricted)
  4. Xin Wang & Alan Montgomery & Kannan Srinivasan, 2008. "When auction meets fixed price: a theoretical and empirical examination of buy-it-now auctions," Quantitative Marketing and Economics, Springer, vol. 6(4), pages 339-370, December. [Downloadable!] (restricted)
  5. Matthew Rabin, 2006. "A Model of Reference-Dependent Preferences," The Quarterly Journal of Economics, MIT Press, vol. 121(4), pages 1133-1165, November. [Downloadable!] (restricted)
  6. Budish, Eric B. & Takeyama, Lisa N., 2001. "Buy prices in online auctions: irrationality on the internet?," Economics Letters, Elsevier, vol. 72(3), pages 325-333, September. [Downloadable!] (restricted)
  7. Wang, Ruqu, 1993. "Auctions versus Posted-Price Selling," American Economic Review, American Economic Association, vol. 83(4), pages 838-51, September. [Downloadable!] (restricted)
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  8. Subir Bose & Arup Daripa, 2009. "Optimal sale across venues and auctions with a buy-now option," Economic Theory, Springer, vol. 38(1), pages 137-168, January. [Downloadable!] (restricted)
  9. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March. [Downloadable!] (restricted)
  10. Stephanie Rosenkranz & Patrick W. Schmitz, 2007. "Reserve Prices in Auctions as Reference Points," Economic Journal, Royal Economic Society, vol. 117(520), pages 637-653, 04. [Downloadable!] (restricted)
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  11. René Kirkegaard & Per Baltzer Overgaard, 2008. "Buy-out prices in auctions: seller competition and multi-unit demands," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 770-789. [Downloadable!] (restricted)
  12. Dr. Peter Kenning & Hilke Plassmann, 2004. "NeuroEconomics," Experimental 0412005, EconWPA. [Downloadable!]
  13. Timothy Mathews, 2004. "The Impact of Discounting on an Auction with a Buyout Option: a Theoretical Analysis Motivated by eBay’s Buy-It-Now Feature," Journal of Economics, Springer, vol. 81(1), pages 25-52, 01. [Downloadable!] (restricted)
  14. Hidvegi, Zoltan & Wang, Wenli & Whinston, Andrew B., 2006. "Buy-price English auction," Journal of Economic Theory, Elsevier, vol. 129(1), pages 31-56, July. [Downloadable!] (restricted)
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