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Competition Among Mechanism Designers in a Common Value Environment

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  • Michael Peters

Abstract

A competitive economy is studied in which sellers offer alternative direct mechanisms to buyers who have private information about their own private use value for the commodity being traded. In addition the commodity has a common value to all buyers, perhaps represented by the future resale value of the commodity. A competitive equilibrium in mechanisms is described. In every such equilibrium it is shown that sellers must offer mechanisms that are allocationally equivalent to English ascending price auctions. The reservation prices that sellers set are equal to the ex post value of a 'marginal' unsold unit. This value is below the ex post opportunity cost to the seller of trading the commodity.

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File URL: http://www.economics.utoronto.ca/public/workingPapers/UT-ECIPA-PETERS-96-01.ps
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Bibliographic Info

Paper provided by University of Toronto, Department of Economics in its series Working Papers with number peters-96-01.

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Length: 30 pages
Date of creation: 15 Apr 1996
Date of revision:
Handle: RePEc:tor:tecipa:peters-96-01

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  1. Bulow, Jeremy I & Klemperer, Paul, 1994. "Auctions vs. Negotiations," CEPR Discussion Papers 924, C.E.P.R. Discussion Papers.
  2. Vincent Daniel R., 1995. "Bidding Off the Wall: Why Reserve Prices May Be Kept Secret," Journal of Economic Theory, Elsevier, vol. 65(2), pages 575-584, April.
  3. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. McAfee, R Preston, 1993. "Mechanism Design by Competing Sellers," Econometrica, Econometric Society, vol. 61(6), pages 1281-1312, November.
  5. Peters, Michael, 1997. "A Competitive Distribution of Auctions," Review of Economic Studies, Wiley Blackwell, vol. 64(1), pages 97-123, January.
  6. McAfee, R Preston & Quan, Daniel C & Vincent, Daniel R, 2002. "How to Set Minimum Acceptable Bids, with an Application to Real Estate Auctions," Journal of Industrial Economics, Wiley Blackwell, vol. 50(4), pages 391-416, December.
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Cited by:
  1. Jan Eeckhout & Philipp Kircher, 2010. "Sorting versus screening: search frictions and competing mechanisms," LSE Research Online Documents on Economics 29704, London School of Economics and Political Science, LSE Library.
  2. Subir Bose & George Deltas, 2007. "Exclusive Versus Non-exclusive Dealing in Auctions with Resale," Economic Theory, Springer, vol. 31(1), pages 1-17, April.
  3. Eeckhout, Jan & Kircher, Philipp, 2010. "Sorting versus screening: Search frictions and competing mechanisms," Journal of Economic Theory, Elsevier, vol. 145(4), pages 1354-1385, July.
  4. Ángel Hernando Veciana, 2001. "Competition Among Auctioneers," Working Papers. Serie AD 2001-18, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  5. Hernando-Veciana, Angel, 2005. "Competition among auctioneers in large markets," Journal of Economic Theory, Elsevier, vol. 121(1), pages 107-127, March.
  6. Klaus Kultti, 2003. "About Market Structure," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 240-251, January.

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