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Vickrey Auctions with Sequential and Costly Participation

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  • Tian, Guoqiang
  • Xiao, Mingjun

Abstract

This paper investigates the cutoff strategies and the effects of sequential and costly participation in Vickrey auctions with independent private value settings. It demonstrates a Stackelberg version of participation decision in auctions, while simultaneous participation can be regarded as a Cournot version in auctions. Buyers adopt cut-off participation strategies. In two-buyer case, the cutoff strategy equilibrium is unique. The follower's critical values are always monotonic in participation cost in both symmetric and asymmetric settings. This is also true for the leader with mild conditions on c.d.fs. We also characterize equilibria in three-buyer and more general n-buyer environments. We then study buyer's preference to be a leader or a follower. Comparison with simultaneous model shows that the driven-out effect is much stronger in our sequential participation model, which implies the simultaneous specification might not be desirable.

Suggested Citation

  • Tian, Guoqiang & Xiao, Mingjun, 2009. "Vickrey Auctions with Sequential and Costly Participation," MPRA Paper 41203, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:41203
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    File URL: https://mpra.ub.uni-muenchen.de/41203/1/MPRA_paper_41203.pdf
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    References listed on IDEAS

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    1. Campbell, Colin M., 1998. "Coordination in Auctions with Entry," Journal of Economic Theory, Elsevier, vol. 82(2), pages 425-450, October.
    2. Gal-Or, Esther, 1985. "First Mover and Second Mover Advantages," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 649-653, October.
    3. Tan, Guofu & Yilankaya, Okan, 2006. "Equilibria in second price auctions with participation costs," Journal of Economic Theory, Elsevier, vol. 130(1), pages 205-219, September.
    4. Samuelson, William F., 1985. "Competitive bidding with entry costs," Economics Letters, Elsevier, vol. 17(1-2), pages 53-57.
    5. McAfee, R. Preston & McMillan, John, 1987. "Auctions with entry," Economics Letters, Elsevier, vol. 23(4), pages 343-347.
    6. Lu, Jingfeng, 2006. "Endogenous entry and auctions design with private participation costs," MPRA Paper 934, University Library of Munich, Germany.
    7. Krishna, Vijay, 2009. "Auction Theory," Elsevier Monographs, Elsevier, edition 2, number 9780123745071.
    8. In-Koo Cho & David M. Kreps, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 179-221.
    9. Harstad, Ronald M. & Kagel, John H. & Levin, Dan, 1990. "Equilibrium bid functions for auctions with an uncertain number of bidders," Economics Letters, Elsevier, vol. 33(1), pages 35-40, May.
    10. Chakraborty, Indranil & Kosmopoulou, Georgia, 2001. "Auctions with endogenous entry," Economics Letters, Elsevier, vol. 72(2), pages 195-200, August.
    11. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-599, June.
    12. Green, Jerry & Laffont, Jean-Jacques, 1984. "Participation constraints in the vickrey auction," Economics Letters, Elsevier, vol. 16(1-2), pages 31-36.
    13. Cao, Xiaoyong & Tian, Guoqiang, 2007. "Second-price Auction with Two-Dimensional Private Information on Values and Participation Costs," MPRA Paper 41224, University Library of Munich, Germany.
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    Cited by:

    1. Che, XiaoGang & Lee, Peter & Yang, Yibai, 2013. "The impact of resale on entry in second price auctions," Mathematical Social Sciences, Elsevier, vol. 66(2), pages 163-168.

    More about this item

    Keywords

    Sequential Participation; Participation Cost; Second Price Auction;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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