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Price Reveal Auctions

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  • Gallice Andrea

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Abstract

A price reveal auction (PRA) is a descending price auction in which the current price of the item on sale is hidden. Buyers can privately observe the price only by paying a fee, and every time an agent does so, the price falls by a predetermined amount. We show that if the number of participants, n$$n$$, is common knowledge, then in equilibrium a PRA replicates the outcome of a posted price mechanism. In particular, at most one buyer observes the price and the auction immediately finishes. In contrast, multiple entries can occur and profitability is enhanced when agents are uncertain about n$$n$$. Under some conditions, a PRA may even yield higher expected revenues than standard auction formats.

Suggested Citation

  • Gallice Andrea, 2016. "Price Reveal Auctions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 16(2), pages 485-514, June.
  • Handle: RePEc:bpj:bejtec:v:16:y:2016:i:2:p:485-514:n:4
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    References listed on IDEAS

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    1. Brennan C. Platt & Joseph Price & Henry Tappen, 2010. "Pay-to-Bid Auctions," NBER Working Papers 15695, National Bureau of Economic Research, Inc.
    2. Andrea Gallice, 2009. "Lowest Unique Bid Auctions with Signals," Carlo Alberto Notebooks 112, Collegio Carlo Alberto, revised Sep 2009.
    3. J├╝rgen Eichberger & Dmitri Vinogradov, 2008. "Least Unmatched Price Auctions: A First Approach," Working Papers 0471, University of Heidelberg, Department of Economics, revised Jul 2008.
    4. Di Gaetano, Luigi, 2011. "A model of descending auction with hidden starting price and endogenous price decrease," MPRA Paper 35773, University Library of Munich, Germany.
    5. Andrea Gallice & Giuseppe Sorrenti, 2015. "Curious about the price? Consumers' behavior in price reveal auctions," Carlo Alberto Notebooks 432, Collegio Carlo Alberto.
    6. Krishna, Vijay, 2009. "Auction Theory," Elsevier Monographs, Elsevier, edition 2, number 9780123745071.
    7. Amnon Rapoport & Hironori Otsubo & Bora Kim & William E. Stein, 2009. "Unique Bid Auction Games," Jena Economic Research Papers 2009-005, Friedrich-Schiller-University Jena.
    8. Andrea Gallice, 2010. "Price Reveal Auctions on the Internet," Carlo Alberto Notebooks 147, Collegio Carlo Alberto.
    9. Raviv, Yaron & Virag, Gabor, 2009. "Gambling by auctions," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 369-378, May.
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    Cited by:

    1. Hinnosaar, Toomas, 2016. "Penny auctions," International Journal of Industrial Organization, Elsevier, vol. 48(C), pages 59-87.
    2. Andrea Gallice & Giuseppe Sorrenti, 2015. "Curious about the price? Consumers' behavior in price reveal auctions," Carlo Alberto Notebooks 432, Collegio Carlo Alberto.
    3. Toomas Hinnosaar, 2013. "Penny Auctions are Unpredictable," Carlo Alberto Notebooks 305, Collegio Carlo Alberto.

    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

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