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Competition Among Mechanism Designers in a Common Value Environment

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  • Michael Peters

Abstract

A competitive economy is studied in which sellers offer alternative direct mechanisms to buyers who have private information about their own private use value for the commodity being traded. In addition the commodity has a common value to all buyers, perhaps represented by the future resale value of the commodity. A competitive equilibrium in mechanisms is described. In every such equilibrium it is shown that sellers must offer mechanisms that are allocationally equivalent to English ascending price auctions. The reservation prices that sellers set are equal to the ex post value of a 'marginal' unsold unit. This value is below the ex post opportunity cost to the seller of trading the commodity.

Suggested Citation

  • Michael Peters, 1996. "Competition Among Mechanism Designers in a Common Value Environment," Working Papers peters-96-01, University of Toronto, Department of Economics.
  • Handle: RePEc:tor:tecipa:peters-96-01
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    References listed on IDEAS

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    1. McAfee, R Preston & Quan, Daniel C & Vincent, Daniel R, 2002. "How to Set Minimum Acceptable Bids, with an Application to Real Estate Auctions," Journal of Industrial Economics, Wiley Blackwell, vol. 50(4), pages 391-416, December.
    2. Michael Peters, 1997. "A Competitive Distribution of Auctions," Review of Economic Studies, Oxford University Press, vol. 64(1), pages 97-123.
    3. Bulow, Jeremy I. & Klemperer, Paul, 1994. "Auctions vs. Negotiations," CEPR Discussion Papers 924, C.E.P.R. Discussion Papers.
    4. McAfee, R Preston, 1993. "Mechanism Design by Competing Sellers," Econometrica, Econometric Society, vol. 61(6), pages 1281-1312, November.
    5. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
    6. Vincent Daniel R., 1995. "Bidding Off the Wall: Why Reserve Prices May Be Kept Secret," Journal of Economic Theory, Elsevier, vol. 65(2), pages 575-584, April.
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    Citations

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    Cited by:

    1. Hila Etzion & Edieal Pinker & Abraham Seidmann, 2006. "Analyzing the Simultaneous Use of Auctions and Posted Prices for Online Selling," Manufacturing & Service Operations Management, INFORMS, vol. 8(1), pages 68-91, March.
    2. Eeckhout, Jan & Kircher, Philipp, 2010. "Sorting versus screening: Search frictions and competing mechanisms," Journal of Economic Theory, Elsevier, vol. 145(4), pages 1354-1385, July.
    3. Ángel Hernando Veciana, 2001. "Competition Among Auctioneers," Working Papers. Serie AD 2001-18, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    4. Guerrieri, Veronica & Julien, Benoit & Kircher, Philipp & Wright, Randall, 2017. "Directed Search: A Guided Tour," CEPR Discussion Papers 12315, C.E.P.R. Discussion Papers.
    5. Hernando-Veciana, Angel, 2005. "Competition among auctioneers in large markets," Journal of Economic Theory, Elsevier, vol. 121(1), pages 107-127, March.
    6. Subir Bose & George Deltas, 2007. "Exclusive Versus Non-exclusive Dealing in Auctions with Resale," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 31(1), pages 1-17, April.
    7. Klaus Kultti, 2003. "About Market Structure," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 240-251, January.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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