Price Reveal Auctions
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.
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Volume (Year): 16 (2016)
Issue (Month): 2 (June)
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References listed on IDEAS
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- Brennan C. Platt & Joseph Price & Henry Tappen, 2010. "Pay-to-Bid Auctions," NBER Working Papers 15695, National Bureau of Economic Research, Inc.
- Amnon Rapoport & Hironori Otsubo & Bora Kim & William E. Stein, 2009. "Unique Bid Auction Games," Jena Economic Research Papers 2009-005, Friedrich-Schiller-University Jena.
- Andrea Gallice, 2009. "Lowest Unique Bid Auctions with Signals," Carlo Alberto Notebooks 112, Collegio Carlo Alberto, revised Sep 2009.
- Jürgen Eichberger & Dmitri Vinogradov, 2008. "Least Unmatched Price Auctions: A First Approach," Working Papers 0471, University of Heidelberg, Department of Economics, revised Jul 2008.
- 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.
- Andrea Gallice & Giuseppe Sorrenti, 2015. "Curious about the price? Consumers' behavior in price reveal auctions," Carlo Alberto Notebooks 432, Collegio Carlo Alberto.
- Krishna, Vijay, 2002. "Auction Theory," Elsevier Monographs, Elsevier, edition 1, number 9780124262973.
- Andrea Gallice, 2010. "Price Reveal Auctions on the Internet," Carlo Alberto Notebooks 147, Collegio Carlo Alberto.
- 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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