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Auction Design without Commitment

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  • Hannu Vartiainen

    (Yrjö Jahnsson Foundation and University of Helsinki, Finland)

Abstract

We study auction design when parties cannot commit themselves to the mechanism. The seller may change the rules of the game and the buyers choose their outside option at all stages. We assume that the seller has a leading role in equilibrium selection at any stage of the game. Stationary equilibria are characterized in the language of vonNeumann-Morgenstern stable sets. This simplifies the analysis remarkably. In the one buyer case, we obtain the Coase conjecture: the buyer obtains all the surplus and efficiency is reached. However, in the multiple buyer case the seller can achieve more: she is able to commit to the English auction. Typically the converse also holds, the English auction is the only stable auction mechanism.

Suggested Citation

  • Hannu Vartiainen, 2003. "Auction Design without Commitment," Working Papers 2003.24, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2003.24
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    Cited by:

    1. Onur A. Koska & Ilke Onur & Frank Stähler, 2015. "The Scope of Auctions in the Presence of Downstream Interactions and Information Externalities," CESifo Working Paper Series 5256, CESifo Group Munich.
    2. Dirk Bergemann & Benjamin Brooks & Stephen Morris, 2016. "Selling to Intermediaries: Optimal Auction Design in a Common Value Model," Cowles Foundation Discussion Papers 2064R, Cowles Foundation for Research in Economics, Yale University, revised Jul 2017.
    3. Skreta, Vasiliki, 2015. "Optimal auction design under non-commitment," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 854-890.
    4. Leonardo Rezende, 2009. "Biased procurement auctions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(1), pages 169-185, January.
    5. Chia-Hui Chen & Junichiro Ishida, 2013. "Auctions Versus Negotiations: The Role of Price Discrimination," ISER Discussion Paper 0873, Institute of Social and Economic Research, Osaka University.
    6. Qingmin Liu & Konrad Mierendorff & Xianwen Shi, 2013. "Auctions with Limited Commitment," Working Papers tecipa-504, University of Toronto, Department of Economics.
    7. David McAdams & Michael Schwarz, 2007. "Credible Sales Mechanisms and Intermediaries," American Economic Review, American Economic Association, vol. 97(1), pages 260-276, March.
    8. Todd R. Kaplan & Shmuel Zamir, 2014. "Advances in Auctions," Discussion Papers 1405, Exeter University, Department of Economics.
    9. Kaplan, Todd R. & Zamir, Shmuel, 2015. "Advances in Auctions," Handbook of Game Theory with Economic Applications, Elsevier.
    10. Gretschko, Vitali & Wambach, Achim, 2017. "Contract Design With Limited Commitment," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168269, Verein für Socialpolitik / German Economic Association.
    11. Gretschko, Vitali & Wambach, Achim, 2017. "Contract (re-)negotiation with private and common values," ZEW Discussion Papers 17-056, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    12. Gretschko, Vitali & Wambach, Achim, 2015. "Common Values and the Coase Conjecture: Inefficiencies in Frictionless Contract (Re-)Negotiation," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113064, Verein für Socialpolitik / German Economic Association.
    13. Kei Kawakami, 2016. "Posterior renegotiation-proofness in a two-person decision problem," International Journal of Game Theory, Springer;Game Theory Society, vol. 45(4), pages 893-931, November.
    14. Lamping, Jennifer, 2008. "The Value of Commitment in Auctions with Matching," MPRA Paper 24373, University Library of Munich, Germany.

    More about this item

    Keywords

    Auction theory; commitment; stable sets;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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