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Optimal Auctions with Simultaneous and Costly Participation

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  • Celik, Gorkem
  • Yilankaya, Okan

Abstract

We study the optimal auction problem with participation costs in the symmetric independent private values setting, where bidders know their valuations when they make independent participation decisions. After characterizing the optimal auction in terms of participation cutoffs, we provide an example where it is asymmetric. We then investigate when the optimal auction will be symmetric/asymmetric and the nature of possible asymmetries. We also show that, under some conditions, the seller obtains her maximal profit in an (asymmetric) equilibrium of an anonymous second price auction. In general, the seller can also use non-anonymous auctions that resemble the ones that are actually observed in practice.

Suggested Citation

  • Celik, Gorkem & Yilankaya, Okan, 2005. "Optimal Auctions with Simultaneous and Costly Participation," Microeconomics.ca working papers celik-05-05-09-03-55-40, Vancouver School of Economics, revised 09 Jun 2006.
    • Handle: RePEc:ubc:pmicro:celik-05-05-09-03-55-40
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    1. McAfee, R. Preston & McMillan, John, 1989. "Government procurement and international trade," Journal of International Economics, Elsevier, vol. 26(3-4), pages 291-308, May.
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    8. Celik Gorkem & Yilankaya Okan, 2009. "Optimal Auctions with Simultaneous and Costly Participation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-33, July.
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    Cited by:

    1. Yannai A. Gonczarowski & Nicole Immorlica & Yingkai Li & Brendan Lucier, 2021. "Revenue Maximization for Buyers with Costly Participation," Papers 2103.03980, arXiv.org, revised Nov 2023.
    2. Ehrhart, Karl-Martin & Hanke, Ann-Katrin & Ott, Marion, 2020. "A small volume reduction that melts down the market: Auctions with endogenous rationing," ZEW Discussion Papers 20-014, ZEW - Leibniz Centre for European Economic Research.
    3. Hu Luke, 2013. "Optimal Use of Rewards as Commitment Device When Bidding Is Costly," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 13(1), pages 1-11, May.
    4. Celik, Gorkem & Yilankaya, Okan, 2017. "Resale in second-price auctions with costly participation," International Journal of Industrial Organization, Elsevier, vol. 54(C), pages 148-174.
    5. Alex Gershkov & Benny Moldovanu & Philipp Strack & Mengxi Zhang, 2021. "A Theory of Auctions with Endogenous Valuations," Journal of Political Economy, University of Chicago Press, vol. 129(4), pages 1011-1051.
    6. Arozamena, Leandro & Weinschelbaum, Federico, 2011. "On favoritism in auctions with entry," Economics Letters, Elsevier, vol. 110(3), pages 265-267, March.
    7. Bognar, Katalin & Börgers, Tilman & Meyer-ter-Vehn, Moritz, 2010. "An optimal Voting System when Voting is costly," MPRA Paper 29123, University Library of Munich, Germany.
    8. Jehiel, Philippe & Lamy, Laurent, 2014. "On discrimination in procurement auctions," CEPR Discussion Papers 9790, C.E.P.R. Discussion Papers.
    9. Gick, Wolfgang, 2015. "A Theory of Delegated Contracting," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113069, Verein für Socialpolitik / German Economic Association.
    10. Shanglyu Deng & Qiyao Zhou, 2023. "Recurring Auctions with Costly Entry: Theory and Evidence," Papers 2306.17355, arXiv.org, revised Aug 2023.
    11. Hubbard, Timothy P. & Paarsch, Harry J., 2009. "Investigating bid preferences at low-price, sealed-bid auctions with endogenous participation," International Journal of Industrial Organization, Elsevier, vol. 27(1), pages 1-14, January.
    12. Hans Peter Grüner & Thomas Tröger, 2019. "Linear Voting Rules," Econometrica, Econometric Society, vol. 87(6), pages 2037-2077, November.
    13. Ginzburg, Boris, 2019. "A Simple Model of Competitive Testing," MPRA Paper 99463, University Library of Munich, Germany.
    14. Xiaoyong Cao & Guofu Tan & Guoqiang Tian & Okan Yilankaya, 2018. "Equilibria in second-price auctions with private participation costs," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(2), pages 231-249, March.
    15. Bernhardt, Dan & Liu, Tingjun & Sogo, Takeharu, 2020. "Costly auction entry, royalty payments, and the optimality of asymmetric designs," Journal of Economic Theory, Elsevier, vol. 188(C).
    16. Celik Gorkem & Yilankaya Okan, 2009. "Optimal Auctions with Simultaneous and Costly Participation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-33, July.
    17. 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, September.
    18. Yumiko Baba, 2013. "A Note On Dutch Auctions With Time Credits," Working Papers e053, Tokyo Center for Economic Research.
    19. Bognar, Katalin & Börgers, Tilman & Meyer-ter-Vehn, Moritz, 2015. "An optimal voting procedure when voting is costly," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 1056-1073.

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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