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Price Reveal Auctions

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  • Andrea Gallice

Abstract

A price reveal auction (PRA) is a descending price auction in which the current price of the item on sale is hidden. Buyers can privately observe the price only by paying a fee, and every time an agent does so, the price falls by a predetermined amount. We show that if the number of participants, n, is common knowledge, then in equilibrium a PRA replicates the outcome of a posted price mechanism. In particular, at most one buyer observes the price and the auction immediately ?nishes. In contrast, multiple entries can occur and pro?tability is enhanced when agents are uncertain about n. Under some conditions, a PRA may even yield higher expected revenues than standard auction formats.

Suggested Citation

  • Andrea Gallice, 2015. "Price Reveal Auctions," Carlo Alberto Notebooks 437, Collegio Carlo Alberto.
  • Handle: RePEc:cca:wpaper:437
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    File URL: http://www.carloalberto.org/assets/working-papers/no.437.pdf
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    Other versions of this item:

    • Andrea Gallice, 2012. "Price Reveal Auctions," Working papers 015, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.

    References listed on IDEAS

    as
    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. J├╝rgen Eichberger & Dmitri Vinogradov, 2008. "Least Unmatched Price Auctions: A First Approach," Working Papers 0471, University of Heidelberg, Department of Economics, revised Jul 2008.
    4. 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.
    5. Krishna, Vijay, 2009. "Auction Theory," Elsevier Monographs, Elsevier, edition 2, number 9780123745071, August.
    6. Raviv, Yaron & Virag, Gabor, 2009. "Gambling by auctions," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 369-378, May.
    7. Andrea Gallice & Giuseppe Sorrenti, 2015. "Curious about the price? Consumers' behavior in price reveal auctions," Carlo Alberto Notebooks 432, Collegio Carlo Alberto.
    8. Amnon Rapoport & Hironori Otsubo & Bora Kim & William E. Stein, 2009. "Unique Bid Auction Games," Jena Economic Research Papers 2009-005, Friedrich-Schiller-University Jena.
    9. Andrea Gallice, 2010. "Price Reveal Auctions on the Internet," Carlo Alberto Notebooks 147, Collegio Carlo Alberto.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Andrea Gallice & Giuseppe Sorrenti, 2015. "Curious about the price? Consumers' behavior in price reveal auctions," Carlo Alberto Notebooks 432, Collegio Carlo Alberto.
    2. Hinnosaar, Toomas, 2016. "Penny auctions," International Journal of Industrial Organization, Elsevier, vol. 48(C), pages 59-87.
    3. Toomas Hinnosaar, 2013. "Penny Auctions are Unpredictable," Carlo Alberto Notebooks 305, Collegio Carlo Alberto.

    More about this item

    Keywords

    price reveal auctions; pay-per-bid auctions; endogenous price decrease.;

    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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