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Pre-auction offers in asymmetric first-price and second-price auctions

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  • Kirkegaard, René
  • Overgaard, Per Baltzer

Abstract

We consider first-price and second-price auctions with asymmetric buyers, and examine whether pre-auction offers to a subset of buyers are profitable. A single offer is never profitable prior to a second-price auction, but may be profitable prior to a first-price auction. However, a sequence of offers is profitable in either type of auction. In our model, suitably chosen pre-auction offers work because they move the assignment when bidder valuations are "near the top" closer to the optimal, revenue-maximizing assignment.

Suggested Citation

  • Kirkegaard, René & Overgaard, Per Baltzer, 2008. "Pre-auction offers in asymmetric first-price and second-price auctions," Games and Economic Behavior, Elsevier, vol. 63(1), pages 145-165, May.
  • Handle: RePEc:eee:gamebe:v:63:y:2008:i:1:p:145-165
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    1. Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, vol. 86(1), pages 180-194, March.
    2. Lopomo, Giuseppe, 1998. "The English Auction Is Optimal Among Simple Sequential Auctions," Journal of Economic Theory, Elsevier, vol. 82(1), pages 144-166, September.
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    6. 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.
    7. Krishna, Vijay, 2009. "Auction Theory," Elsevier Monographs, Elsevier, edition 2, number 9780123745071.
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    10. Budish, Eric B. & Takeyama, Lisa N., 2001. "Buy prices in online auctions: irrationality on the internet?," Economics Letters, Elsevier, vol. 72(3), pages 325-333, September.
    11. René Kirkegaard, 2006. "A short proof of the Bulow-Klemperer auctions vs. negotiations result," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 28(2), pages 449-452, June.
    12. Blume, Andreas & Heidhues, Paul, 2004. "All equilibria of the Vickrey auction," Journal of Economic Theory, Elsevier, vol. 114(1), pages 170-177, January.
    13. Timothy Mathews, 2003. "A Risk Averse Seller in a Continuous Time Auction with a Buyout Option," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 5(2), January.
    14. Kirkegaard, René, 2009. "Asymmetric first price auctions," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1617-1635, July.
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    Cited by:

    1. René Kirkegaard, 2007. "Comparative Statics and Welfare in Heterogeneous Contests: Bribes, Caps, and Performance Thresholds," Working Papers 0702, Brock University, Department of Economics.
    2. Bernard Lebrun, 2015. "Revenue-superior variants of the second-price auction," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 59(2), pages 245-275, June.
    3. 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.
    4. Richard Engelbrecht-Wiggans & Elena Katok, 2006. "E-sourcing in Procurement: Theory and Behavior in Reverse Auctions with Noncompetitive Contracts," Management Science, INFORMS, vol. 52(4), pages 581-596, April.
    5. Schmöller, Arno, 2010. "Bidding Behavior, Seller Strategies, and the Utilization of Information in Auctions for Complex Goods," Munich Dissertations in Economics 11175, University of Munich, Department of Economics.

    More about this item

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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