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Auctions with flexible entry fees: A note

  • Janssen, Maarten C.W.
  • Karamychev, Vladimir A.
  • Maasland, Emiel

There is by now a large literature arguing that auctions with a variety of after-market interactions may not yield an efficient allocation of the objects for sale, especially when the bidders impose strong negative externalities upon each other. In this note, we argue that these inefficiencies can be avoided by asking bidders prior to the auction to submit any publicly observable payment they would like to make. These payments, so-called flexible entry fees, do not affect the allocation decision of the auctioneer. We show that auctions with flexible entry fees have a fully revealing equilibrium where bidders signal their type before the auction itself takes place.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 72 (2011)
Issue (Month): 2 (June)
Pages: 594-601

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Handle: RePEc:eee:gamebe:v:72:y:2011:i:2:p:594-601
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  1. Hakenes, Hendrik & Schnabel, Isabel, 2000. "License Auctions and Market Structure," Sonderforschungsbereich 504 Publications 01-21, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  2. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
  3. Klemperer, Paul, 2000. "What Really Matters in Auction Design," CEPR Discussion Papers 2581, C.E.P.R. Discussion Papers.
  4. Molnár, József & Virág, Gábor, 2008. "Revenue maximizing auctions with market interaction and signaling," Economics Letters, Elsevier, vol. 99(2), pages 360-363, May.
  5. Moldovanu, Benny & Sela, Aner, 1998. "Patent Licensing to Bertrand Competitors," Sonderforschungsbereich 504 Publications 98-21, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  6. Philippe Jehiel & Benny Moldovanu, 2005. "Allocative and Informational Externalities in Auctions and Related Mechanisms," Levine's Bibliography 784828000000000490, UCLA Department of Economics.
  7. Veronika Grimm & Frank Riedel & Elmar G. Wolfstetter, 2001. "Low Price Equilibrium in Multi-Unit Auctions: The GSM Spectrum Auction in Germany," CESifo Working Paper Series 506, CESifo Group Munich.
  8. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1996. "How (Not) to Sell Nuclear Weapons," American Economic Review, American Economic Association, vol. 86(4), pages 814-29, September.
  9. Philippe Jehiel & Benny Moldovanu, 2000. "Auctions with Downstream Interaction Among Buyers," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 768-791, Winter.
  10. Das Varma, Gopal, 2003. "Bidding for a process innovation under alternative modes of competition," International Journal of Industrial Organization, Elsevier, vol. 21(1), pages 15-37, January.
  11. Janssen, Maarten C.W. & Karamychev, Vladimir A., 2009. "Auctions, aftermarket competition, and risk attitudes," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 274-285, March.
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