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Auctions with Private Entry Costs

  • Kaplan, Todd
  • Sela, Aner

We study auctions where bidders have private information about their entry costs and the seller does not benefit from these entry costs. We consider a symmetric environment where all bidders have the same value for the object being sold, and also an asymmetric environment where bidders may have different valuations for the object. In these environments, the seller’s pay-off as well as the social surplus may either increase or decrease in the number of bidders though not necessarily in the same direction. The auction designs that maximize the social surplus or the seller’s pay-off are analysed.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4080.

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Date of creation: Oct 2003
Date of revision:
Handle: RePEc:cpr:ceprdp:4080
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  1. Elberfeld, Walter & Wolfstetter, Elmar, 1999. "A dynamic model of Bertrand competition with entry," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 513-525, May.
  2. Smith, James L. & Levin, Dan, 1996. "Ranking Auctions with Risk Averse Bidders," Journal of Economic Theory, Elsevier, vol. 68(2), pages 549-561, February.
  3. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June.
  4. John G. Riley & William Samuelson, 1979. "Optimal Auctions," UCLA Economics Working Papers 152, UCLA Department of Economics.
  5. Engelbrecht-Wiggans Richard, 1993. "Optimal Auctions Revisited," Games and Economic Behavior, Elsevier, vol. 5(2), pages 227-239, April.
  6. Todd R. Kaplan & Shmuel Zamir, 2002. "A Note on Revenue Effects of Asymmetry in Private-Value Auctions," Discussion Paper Series dp291, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
  7. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. Thomas, Charles J., 2002. "The effect of asymmetric entry costs on Bertrand competition," International Journal of Industrial Organization, Elsevier, vol. 20(5), pages 589-609, May.
  9. McAfee, R. Preston & McMillan, John, 1987. "Auctions with entry," Economics Letters, Elsevier, vol. 23(4), pages 343-347.
  10. Samuelson, William F., 1985. "Competitive bidding with entry costs," Economics Letters, Elsevier, vol. 17(1-2), pages 53-57.
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