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Auctions with signaling concerns

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  • Olivier Bos
  • Tom Truyts

Abstract

We study a symmetric private value auction with signaling, in which the auction outcome is used by an outside observer to infer the bidders' types. We elicit conditions under which an essentially unique D1 equilibrium bidding function exists in the second‐price and the English auctions. We establish there is no equivalence between these two auction designs, neither in bidding strategies nor in expected revenue. This is because the presence or the absence of an increasing price clock affects signaling incentives differently in both auction formats, and thereby also the bidders' incentives to overbid their types. This leads to a strictly higher expected revenue in the second‐price auction than in the English auction. Our analysis is completed by a comparison with other disclosure policies. Applications include art auctions and charity auctions.

Suggested Citation

  • Olivier Bos & Tom Truyts, 2021. "Auctions with signaling concerns," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 30(2), pages 420-448, May.
  • Handle: RePEc:bla:jemstr:v:30:y:2021:i:2:p:420-448
    DOI: 10.1111/jems.12406
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    References listed on IDEAS

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    Cited by:

    1. Olivier Bos & Tom Truyts, 2016. "Entry in first-price auctions with signaling," Working Papers of Department of Economics, Leuven 539875, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    2. BOS, Olivier & TRUYTS, Tom, 2016. "Entry in First-price Auctions with Signaling," LIDAM Discussion Papers CORE 2016017, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Cho, Myeonghwan & Song, Joon, 2022. "Auctioning business licenses to engage in Cournot competition," Economics Letters, Elsevier, vol. 210(C).
    4. Bos, Olivier & Gomez-Martinez, Francisco & Onderstal, Sander & Truyts, Tom, 2021. "Signalling in auctions: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 187(C), pages 448-469.

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    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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