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Auctioning with Aspirations: Keep Them Low (Enough)

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  • Shunda, Nicholas

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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Bibliographic Info

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

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  1. Nicholas Shunda, 2007. "Auctions with a Buy Price: The Case of Reference-Dependent Preferences," Working papers, University of Connecticut, Department of Economics 2007-42, University of Connecticut, Department of Economics.
  2. Koszegi, Botond & Rabin, Matthew, 2004. "A Model of Reference-Dependent Preferences," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt0w82b6nm, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  3. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, Econometric Society, vol. 47(2), pages 263-91, March.
  4. Timothy Mathews & Brett Katzman, 2006. "The role of varying risk attitudes in an auction with a buyout option," Economic Theory, Springer, Springer, vol. 27(3), pages 597-613, 04.
  5. Stephanie Rosenkranz & Patrick W. Schmitz, 2005. "Reserve prices in auctions as reference points," Bonn Econ Discussion Papers, University of Bonn, Germany bgse24_2005, University of Bonn, Germany.
  6. Budish, Eric B. & Takeyama, Lisa N., 2001. "Buy prices in online auctions: irrationality on the internet?," Economics Letters, Elsevier, Elsevier, vol. 72(3), pages 325-333, September.
  7. 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, Springer, vol. 6(4), pages 339-370, December.
  8. Milgrom, Paul, 1989. "Auctions and Bidding: A Primer," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 3(3), pages 3-22, Summer.
  9. 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, Springer, vol. 81(1), pages 25-52, 01.
  10. Hidvegi, Zoltan & Wang, Wenli & Whinston, Andrew B., 2006. "Buy-price English auction," Journal of Economic Theory, Elsevier, Elsevier, vol. 129(1), pages 31-56, July.
  11. Subir Bose & Arup Daripa, 2009. "Optimal sale across venues and auctions with a buy-now option," Economic Theory, Springer, Springer, vol. 38(1), pages 137-168, January.
  12. René Kirkegaard & Per Baltzer Overgaard, 2008. "Buy-out prices in auctions: seller competition and multi-unit demands," RAND Journal of Economics, RAND Corporation, RAND Corporation, vol. 39(3), pages 770-789.
  13. Ruqu Wang, 1991. "Auctions Versus Posted-Price Selling," Working Papers, Queen's University, Department of Economics 812, Queen's University, Department of Economics.
  14. John Wooders & Stanley S. Reynolds, 2004. "Auctions with a Buy Price," Econometric Society 2004 North American Summer Meetings, Econometric Society 130, Econometric Society.
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