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Seller competition by mechanism design

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  • Damian Damianov

Abstract

This paper analyzes a market game in which sellers offer trading mechanisms to buyers and buyers decide which seller to go to depending on the trading mechanisms offered. In a (subgame perfect) equilibrium of this market, sellers hold auctions with an efficient reserve price but charge an entry fee. The entry fee depends on the number of buyers and sellers, the distribution of buyer valuations, and the buyer cost of entering the market. As the size of the market increases, the entry fee decreases and converges to zero in the limit. We study how the surplus of buyers and sellers depends on the number of agents on each side of the market in this decentralized trading environment. Copyright Springer-Verlag 2012

Suggested Citation

  • Damian Damianov, 2012. "Seller competition by mechanism design," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 51(1), pages 105-137, September.
  • Handle: RePEc:spr:joecth:v:51:y:2012:i:1:p:105-137
    DOI: 10.1007/s00199-010-0597-z
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    Cited by:

    1. Diego Carrasco-Novoa & Allan Hernández-Chanto, 2022. "Competing Sellers in Security-Bid Auctions under Risk-Averse Bidders," Discussion Papers Series 655, School of Economics, University of Queensland, Australia.
    2. Joyce Delnoij & Kris Jaegher, 2020. "Competing first-price and second-price auctions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 69(1), pages 183-216, February.
    3. J.M.J. Delnoij & K.J.M. De Jaegher, 2016. "Competing first-price and second-price auctions," Working Papers 16-07, Utrecht School of Economics.
    4. Wei-Torng Juang & Guang-Zhen Sun & Kuo-Chih Yuan, 2020. "A model of parallel contests," International Journal of Game Theory, Springer;Game Theory Society, vol. 49(2), pages 651-672, June.

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    More about this item

    Keywords

    Seller competition; Endogenous entry; Auctions; D44; D82;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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