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Price Reveal Auctions on the Internet

Author

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  • Andrea Gallice

Abstract

A price reveal auction is a Dutch auction in which the current price of the item on sale remains hidden. Bidders can privately observe the price only by paying a fee, and every time a bidder does so, the price falls by a predetermined amount. We show that in equilibrium, no rational bidder should enter into such an auction. Contrary to this prediction, data about actual price reveal auctions run on the Internet show that bidders do enter and that the mechanism is profitable for the seller.

Suggested Citation

  • Andrea Gallice, 2010. "Price Reveal Auctions on the Internet," Carlo Alberto Notebooks 147, Collegio Carlo Alberto.
  • Handle: RePEc:cca:wpaper:147
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    File URL: http://www.carloalberto.org/assets/working-papers/no.147.pdf
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    References listed on IDEAS

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    1. Brennan C. Platt & Joseph Price & Henry Tappen, 2010. "Pay-to-Bid Auctions," NBER Working Papers 15695, National Bureau of Economic Research, Inc.
    2. Andrea Gallice, 2009. "Lowest Unique Bid Auctions with Signals," Carlo Alberto Notebooks 112, Collegio Carlo Alberto, revised Sep 2009.
    3. Jürgen Eichberger & Dmitri Vinogradov, 2008. "Least Unmatched Price Auctions: A First Approach," Working Papers 0471, University of Heidelberg, Department of Economics, revised Jul 2008.
    4. Klemperer, Paul, 1999. " Auction Theory: A Guide to the Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 13(3), pages 227-286, July.
    5. Harold Houba & Dinard Laan & Dirk Veldhuizen, 2011. "Endogenous entry in lowest-unique sealed-bid auctions," Theory and Decision, Springer, vol. 71(2), pages 269-295, August.
    6. Krishna, Vijay, 2009. "Auction Theory," Elsevier Monographs, Elsevier, edition 2, number 9780123745071.
    7. Amnon Rapoport & Hironori Otsubo & Bora Kim & William E. Stein, 2009. "Unique Bid Auction Games," Jena Economic Research Papers 2009-005, Friedrich-Schiller-University Jena.
    8. Robert Östling & Joseph Tao-yi Wang & Eileen Y. Chou & Colin F. Camerer, 2011. "Testing Game Theory in the Field: Swedish LUPI Lottery Games," American Economic Journal: Microeconomics, American Economic Association, vol. 3(3), pages 1-33, August.
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    Citations

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    Cited by:

    1. Di Gaetano, Luigi, 2011. "A model of descending auction with hidden starting price and endogenous price decrease," MPRA Paper 35773, University Library of Munich, Germany.
    2. Gallice Andrea, 2016. "Price Reveal Auctions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 16(2), pages 485-514, June.
    3. Yumiko Baba, "undated". "A Note On Dutch Auctions With Time Credits," Working Papers e53, Tokyo Center for Economic Research.

    More about this item

    Keywords

    price reveal auctions; pay-per-bid auctions;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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