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On Discrimination in Auctions with Endogenous Entry

Author

Listed:
  • Philippe Jehiel

    (PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Laurent Lamy

    (PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

When entry is exogenous, strong buyers should be discriminated against weak buyers to maximize revenues (Myerson 1981). When entry is endogenous so that entrants' expected payoffs do not depend on the proposed mechanism, optimal discrimination takes a completely different form. The revenue-maximizing equilibrium requires that there should be no discrimination with respect to entrants irrespective of their ex ante characteristics. Besides, those buyers who always participate should be discriminated against entrants independently of their strength. These predictions are independent of the equilibrium selection when the number of potential entrants grows large. The optimality of first-price auctions is also discussed.

Suggested Citation

  • Philippe Jehiel & Laurent Lamy, 2015. "On Discrimination in Auctions with Endogenous Entry," PSE-Ecole d'économie de Paris (Postprint) halshs-01206167, HAL.
    • Handle: RePEc:hal:pseptp:halshs-01206167
    DOI: 10.1257/aer.20131580
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    Keywords

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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement

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