Optimal advertising of auctions
We study a symmetric independent private values auction model where the revenue-maximizing seller faces a cost cn of attracting n bidders to the auction. If the distribution of valuations possesses an increasing failure rate (IFR), the seller overinvests in attracting bidders compared to the social optimum. Conversely, if the distribution is DFR, the seller underinvests compared to the social optimum. If the distribution of valuations becomes more dispersed, both, a revenue- and a welfare-maximizing seller, attract more bidders.
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- Dirk Bergemann & Juuso Valimaki, 2005.
"Information in Mechanism Design,"
Cowles Foundation Discussion Papers
1532R, Cowles Foundation for Research in Economics, Yale University, revised Jan 2006.
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