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Bidding among Friends and Enemies with Symmetric Information

  • David Ettinger

We consider an auction setting, in a symmetric information framework, in which bidders, even if they fail to obtain the good, care about the price paid by the winner. We prove that the outcome of the first-price auction is not affected by identity-independent price externalities, while the outcome of the second-price auction is. In contrast, identity-dependent price externalities affect the outcome of both auction formats. In any case, the second-price auction exacerbates the effects of price externalities.

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Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 166 (2010)
Issue (Month): 2 (June)
Pages: 365-385

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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201006)166:2_365:bafaew_2.0.tx_2-5
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