IDEAS home Printed from https://ideas.repec.org/a/the/publsh/538.html
   My bibliography  Save this article

Competing auctions: finite markets and convergence

Author

Listed:
  • Virág, Gábor

    () (Department of Economics, University of Rochester)

Abstract

The literature on competing auctions offers a model where sellers compete for buyers by setting reserve prices freely. An important outstanding conjecture (e.g. Peters and Severinov (1997)) is that the sellers post prices close to their marginal costs when the market becomes large. This conjecture is confirmed in this paper. More precisely, we show that if all sellers have zero costs, then the equilibrium reserve price converges to 0 in distribution. I also show that if there is a high enough lower bound on the buyers’ valuations, then there is a symmetric pure strategy equilibrium. In this equilibrium, if the number of buyers (sellers) increases, then the equilibrium reserve price increases (decreases) and the reserve price is decreasing in the size of the market.

Suggested Citation

  • Virág, Gábor, 2010. "Competing auctions: finite markets and convergence," Theoretical Economics, Econometric Society, vol. 5(2), May.
  • Handle: RePEc:the:publsh:538
    as

    Download full text from publisher

    File URL: http://econtheory.org/ojs/index.php/te/article/viewFile/20100241/3779/151
    Download Restriction: no

    References listed on IDEAS

    as
    1. David K. Levine & Drew Fudenberg, 2006. "A Dual-Self Model of Impulse Control," American Economic Review, American Economic Association, pages 1449-1476.
    2. Faruk Gul & Wolfgang Pesendorfer, 2005. "A Simple Theory of Temptation and Self-Control," Levine's Bibliography 784828000000000121, UCLA Department of Economics.
    3. Faruk Gul & Wolfgang Pesendorfer, 2001. "Temptation and Self-Control," Econometrica, Econometric Society, vol. 69(6), pages 1403-1435, November.
    4. Klaus Nehring, 2006. "Self-Control through Second-Order Preferences," Levine's Bibliography 321307000000000391, UCLA Department of Economics.
    5. Noor, Jawwad, 2007. "Commitment and self-control," Journal of Economic Theory, Elsevier, vol. 135(1), pages 1-34, July.
    6. Eddie Dekel & Barton L. Lipman & Aldo Rustichini, 2009. "Temptation-Driven Preferences," Review of Economic Studies, Oxford University Press, vol. 76(3), pages 937-971.
    7. Jawwad Noor, 2006. "Menu-Dependent Self-Control," Boston University - Department of Economics - Working Papers Series WP2006-021, Boston University - Department of Economics.
    8. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    9. Faruk Gul & Wolfgang Pesendorfer, 2004. "Self-Control and the Theory of Consumption," Econometrica, Econometric Society, vol. 72(1), pages 119-158, January.
    10. Haluk Ergin & Todd Sarver, 2010. "A Unique Costly Contemplation Representation," Econometrica, Econometric Society, vol. 78(4), pages 1285-1339, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cristián Troncoso-Valverde, 2015. "Information Release in Second–Price Auctions," Serie Working Papers 15, Universidad del Desarrollo, School of Business and Economics.
    2. Attar, Andrea & Campioni, Eloisa & Piaser, Gwenaël, 2015. "On Competing Mechanisms under Exclusive Competition," TSE Working Papers 15-609, Toulouse School of Economics (TSE).
    3. Backus, Matthew R. & Podwol, Joseph Uri & Schneider, Henry S., 2014. "Search costs and equilibrium price dispersion in auction markets," European Economic Review, Elsevier, vol. 71(C), pages 173-192.
    4. Eberhard Feess & Christian Grund & Markus Walzl & Ansgar Wohlschlegel, 2014. "Competing Trade Mechanisms and Monotone Mechanism Choice," Working Papers 2014-28, Faculty of Economics and Statistics, University of Innsbruck.
    5. Virág, Gábor, 2011. "High profit equilibria in directed search models," Games and Economic Behavior, Elsevier, vol. 71(1), pages 224-234, January.
    6. Podwol, Joseph Uri & Schneider, Henry S., 2016. "Nonstandard bidder behavior in real-world auctions," European Economic Review, Elsevier, vol. 83(C), pages 198-212.

    More about this item

    Keywords

    Competing auctions; finite markets; convergence;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:the:publsh:538. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Martin J. Osborne). General contact details of provider: http://econtheory.org .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.