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Competition among mechanism designers in a common value environment

  • Michael Peters

    ()

    (Department of Economics, University of Toronto, 150 St. George Street, Toronto, Ontario, Canada M5S 3G7)

A competitive economy is studied in which sellers offer alternative direct mechanisms to buyers who have private information about their own private use value for the commodity being traded. In addition the commodity has a common value to all buyers, perhaps represented by the future resale value of the commodity. A competitive equilibrium in mechanisms is described. In every such equilibrium it is shown that sellers must offer mechanisms that are allocationally equivalent to English ascending price auctions. The reservation prices that sellers set are shown to be below their ex post cost of trading the commodity.

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Article provided by Springer in its journal Review of Economic Design.

Volume (Year): 4 (1999)
Issue (Month): 3 ()
Pages: 273-292

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Handle: RePEc:spr:reecde:v:4:y:1999:i:3:p:273-292
Note: Received: 24 April 1998 / Accepted: 8 March 1999
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  1. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
  2. Michael Peters, 1995. "A Competitive Distribution of Auctions," Working Papers peters-95-03, University of Toronto, Department of Economics.
  3. McAfee, R Preston, 1993. "Mechanism Design by Competing Sellers," Econometrica, Econometric Society, vol. 61(6), pages 1281-1312, November.
  4. Vincent Daniel R., 1995. "Bidding Off the Wall: Why Reserve Prices May Be Kept Secret," Journal of Economic Theory, Elsevier, vol. 65(2), pages 575-584, April.
  5. McAfee, R Preston & Quan, Daniel C & Vincent, Daniel R, 2002. "How to Set Minimum Acceptable Bids, with an Application to Real Estate Auctions," Journal of Industrial Economics, Wiley Blackwell, vol. 50(4), pages 391-416, December.
  6. Jeremy Bulow & Paul Klemperer, 1994. "Auctions vs. Negotiations," NBER Working Papers 4608, National Bureau of Economic Research, Inc.
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