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Entry Coordination And Auction Design With Private Costs Of Information Acquisition

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  • JINGFENG LU

Abstract

"Auction design with endogenous entry is complicated by entry coordination among bidders due to multiple entry equilibria issue. This article studies auction design when information acquisition costs are private information of bidders. We show that this problem can be resolved by sufficient dispersion in these costs. First, we find that a simple second-price auction with no entry fee and a reserve price equal to the seller's valuation is ex ante efficient, while a revenue-maximizing auction involves personalized entry fees, which are determined by the hazard rates of their information acquisition cost distribution. Second, we show that sufficient dispersion in the information acquisition costs (more dispersion than a particular uniform distribution by the Bickel-Lehman dispersive order) can coordinate bidders and implement uniquely the desirable entry. The dispersion in information acquisition costs is also necessary for this "unique implementation" result." ("JEL" D44, D82) Copyright (c) 2009 Western Economic Association International.

Suggested Citation

  • Jingfeng Lu, 2010. "Entry Coordination And Auction Design With Private Costs Of Information Acquisition," Economic Inquiry, Western Economic Association International, vol. 48(2), pages 274-289, April.
  • Handle: RePEc:bla:ecinqu:v:48:y:2010:i:2:p:274-289
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:gamebe:v:105:y:2017:i:c:p:104-111 is not listed on IDEAS
    2. Konrad, Kai A. & Kovenock, Dan, 2012. "The lifeboat problem," European Economic Review, Elsevier, pages 552-559.
    3. Ye, Lixin & Zhang, Chenglin, 2017. "Monopolistic nonlinear pricing with consumer entry," Theoretical Economics, Econometric Society, vol. 12(1), January.
    4. Lu, Jingfeng & Ye, Lixin, 2013. "Efficient and optimal mechanisms with private information acquisition costs," Journal of Economic Theory, Elsevier, vol. 148(1), pages 393-408.
    5. Kirkegaard, René, 2012. "Favoritism in asymmetric contests: Head starts and handicaps," Games and Economic Behavior, Elsevier, vol. 76(1), pages 226-248.
    6. Xu, Xiaoshu & Levin, Dan & Ye, Lixin, 2013. "Auctions with entry and resale," Games and Economic Behavior, Elsevier, vol. 79(C), pages 92-105.

    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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