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Bidding among friends and enemies with symmetric information

  • Ettinger, David

We consider an auction setting, in a symmetric information framework, in which bidders, even if they fail to obtain the good, care about the price paid by the winner. We prove that the outcome of the first-price auction is not affected by identity-independent price externalities, while the outcome of the second-price auction is. In contrast, identity-dependent price externalities affect the outcome of both auction formats. In any case, the second-price auction exacerbates the effects of price externalities.

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File URL: http://basepub.dauphine.fr/xmlui/bitstream/123456789/5447/1/ettinger_bidding.PDF
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Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/5447.

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Date of creation: 2010
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Publication status: Published in JITE : Journal of Institutional and Theoretical Economics, 2010, Vol. 166, no. 2. pp. 365-385.Length: 20 pages
Handle: RePEc:dau:papers:123456789/5447
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  7. Maxim Engers & Brian McManus, 2007. "Charity Auctions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(3), pages 953-994, 08.
  8. Jehiel, Phillipe & Moldovanu, Benny, 1997. "Auctions with Downstream Interaction among Buyers," Sonderforschungsbereich 504 Publications 97-06, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  9. Craig Landry & Andreas Lange & John A. List & Michael K. Price & Nicholas G. Rupp, 2005. "Toward an Understanding of the Economics of Charity: Evidence from a Field Experiment," NBER Working Papers 11611, National Bureau of Economic Research, Inc.
  10. Ettinger, David, 2003. "Efficiency in auctions with crossholdings," Economics Letters, Elsevier, vol. 80(1), pages 1-7, July.
  11. Philippe Jehiel & Benny Moldovanu, 1996. "Strategic Nonparticipation," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 84-98, Spring.
  12. Pitchik, Carolyn & Schotter, Andrew, 1986. "Budget Constrained Sequential Auctions," Working Papers 86-21, C.V. Starr Center for Applied Economics, New York University.
  13. Pitchik, Carolyn & Schotter, Andrew, 1986. "Perfect Equilibria in Budget Constrained Sequential Auctions: An Experimental Study," Working Papers 86-22, C.V. Starr Center for Applied Economics, New York University.
  14. Emiel Maasland & Sander Onderstal, 2007. "Auctions with Financial Externalities," Economic Theory, Springer, vol. 32(3), pages 551-574, September.
  15. Rajdeep Singh, 1995. "Takeover Bidding with Toeholds: The Case of the Owner's Curse," Finance 9503001, EconWPA.
  16. Burkart, Mike, 1995. " Initial Shareholdings and Overbidding in Takeover Contests," Journal of Finance, American Finance Association, vol. 50(5), pages 1491-1515, December.
  17. Fan, Cuihong & Jun, Byoung Heon & Wolfstetter, Elmar G., 2009. "Auctioning Process Innovations when Losers’ Bids Determine Royalty Rates," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 291, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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