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Auctions with Flexible Entry Fees

Listed author(s):
  • Maarten Janssen

    (University of Vienna, and Erasmus University Rotterdam)

  • Vladimir A. Karamychev
  • Emiel Maasland

    (Erasmus School of Economics, Erasmus University Rotterdam)

This discussion paper led to an article in Games and Economic Behavior (2011). Vol. 72, pp. 594-601. There is by now a large literature arguing that auctions with a variety of after-market interactions may not yield an efficient allocation of the objects for sale, especially when the bidders impose strong negative externalities upon each other. This paper argues that these inefficiencies can be avoided by asking bidders prior to the auction to submit any public payment they would like to make. These payments, so-called flexible entry fees, do not affect the allocation decision of the auctioneer. We show that auctions with flexible entry fees have a fully revealing equilibrium where bidders signal their type before the auction itself takes place.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 09-109/1.

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Date of creation: 30 Nov 2009
Handle: RePEc:tin:wpaper:20090109
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  1. Maarten C.W. Janssen & Vladimir A. Karamychev, 2010. "Do auctions select efficient firms?," Economic Journal, Royal Economic Society, vol. 120(549), pages 1319-1344, December.
  2. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1996. "How (Not) to Sell Nuclear Weapons," American Economic Review, American Economic Association, vol. 86(4), pages 814-829, September.
  3. Paul Klemperer, 2002. "What Really Matters in Auction Design," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 169-189, Winter.
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  7. Ken Binmore & Paul Klemperer, 2002. "The Biggest Auction Ever: the Sale of the British 3G Telecom Licences," Economic Journal, Royal Economic Society, vol. 112(478), pages 74-96, March.
  8. Krishna, Vijay, 2009. "Auction Theory," Elsevier Monographs, Elsevier, edition 2, number 9780123745071.
  9. Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-366, May.
  10. Klemperer, Paul, 2002. "How (not) to run auctions: The European 3G telecom auctions," European Economic Review, Elsevier, vol. 46(4-5), pages 829-845, May.
  11. Janssen, Maarten C.W. & Karamychev, Vladimir A., 2009. "Auctions, aftermarket competition, and risk attitudes," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 274-285, March.
  12. Heidrun C. Hoppe & Philippe Jehiel & Benny Moldovanu, 2006. "License Auctions and Market Structure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(2), pages 371-396, 06.
  13. Grimm, Veronika & Riedel, Frank & Wolfstetter, Elmar, 2003. "Low price equilibrium in multi-unit auctions: the GSM spectrum auction in Germany," International Journal of Industrial Organization, Elsevier, vol. 21(10), pages 1557-1569, December.
  14. van Damme, Eric, 2002. "The European UMTS-auctions," European Economic Review, Elsevier, vol. 46(4-5), pages 846-858, May.
  15. Philippe Jehiel & Benny Moldovanu, 2000. "Auctions with Downstream Interaction Among Buyers," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 768-791, Winter.
  16. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
  17. Perry, Motty & Wolfstetter, Elmar & Zamir, Shmuel, 2000. "A Sealed-Bid Auction That Matches the English Auction," Games and Economic Behavior, Elsevier, vol. 33(2), pages 265-273, November.
  18. Molnár, József & Virág, Gábor, 2008. "Revenue maximizing auctions with market interaction and signaling," Economics Letters, Elsevier, vol. 99(2), pages 360-363, May.
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