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Optimal Auctions with Simultaneous and Costly Participation

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  • Celik, Gorkem
  • Yilankaya, Okan

Abstract

We study the optimal auction problem with participation costs in the symmetric independent private values setting, where bidders know their valuations when they make independent participation decisions. After characterizing the optimal auction in terms of participation cutoffs, we provide an example where it is asymmetric. We then investigate when the optimal auction will be symmetric/asymmetric and the nature of possible asymmetries. We also show that, under some conditions, the seller obtains her maximal profit in an (asymmetric) equilibrium of an anonymous second price auction. In general, the seller can also use non-anonymous auctions that resemble the ones that are actually observed in practice.

Suggested Citation

  • Celik, Gorkem & Yilankaya, Okan, 2005. "Optimal Auctions with Simultaneous and Costly Participation," Microeconomics.ca working papers celik-05-05-09-03-55-40, Vancouver School of Economics, revised 09 Jun 2006.
  • Handle: RePEc:ubc:pmicro:celik-05-05-09-03-55-40
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    File URL: http://www.econ.ubc.ca/yilankaya/optmech.pdf
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    References listed on IDEAS

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    1. Olivier Compte & Philippe Jehiel, 2007. "Auctions and information acquisition: sealed bid or dynamic formats?," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 355-372, June.
    2. Campbell, Colin M., 1998. "Coordination in Auctions with Entry," Journal of Economic Theory, Elsevier, vol. 82(2), pages 425-450, October.
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    Cited by:

    1. Yannai A. Gonczarowski & Nicole Immorlica & Yingkai Li & Brendan Lucier, 2021. "Revenue Maximization for Buyers with Outside Options," Papers 2103.03980, arXiv.org, revised Jul 2021.
    2. Ehrhart, Karl-Martin & Hanke, Ann-Katrin & Ott, Marion, 2020. "A small volume reduction that melts down the market: Auctions with endogenous rationing," ZEW Discussion Papers 20-014, ZEW - Leibniz Centre for European Economic Research.
    3. Bernhardt, Dan & Liu, Tingjun & Sogo, Takeharu, 2020. "Costly auction entry, royalty payments, and the optimality of asymmetric designs," Journal of Economic Theory, Elsevier, vol. 188(C).
    4. Hu Luke, 2013. "Optimal Use of Rewards as Commitment Device When Bidding Is Costly," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 13(1), pages 1-11, May.
    5. Celik, Gorkem & Yilankaya, Okan, 2017. "Resale in second-price auctions with costly participation," International Journal of Industrial Organization, Elsevier, vol. 54(C), pages 148-174.
    6. Alex Gershkov & Benny Moldovanu & Philipp Strack & Mengxi Zhang, 2021. "A Theory of Auctions with Endogenous Valuations," Journal of Political Economy, University of Chicago Press, vol. 129(4), pages 1011-1051.
    7. Arozamena, Leandro & Weinschelbaum, Federico, 2011. "On favoritism in auctions with entry," Economics Letters, Elsevier, vol. 110(3), pages 265-267, March.
    8. Bognar, Katalin & Börgers, Tilman & Meyer-ter-Vehn, Moritz, 2010. "An optimal Voting System when Voting is costly," MPRA Paper 29123, University Library of Munich, Germany.
    9. René Kirkegaard & Per Baltzer Overgaard, 2008. "Buy‐out prices in auctions: seller competition and multi‐unit demands," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 770-789, September.
    10. Jehiel, Philippe & Lamy, Laurent, 2014. "On discrimination in procurement auctions," CEPR Discussion Papers 9790, C.E.P.R. Discussion Papers.
    11. Gick, Wolfgang, 2015. "A Theory of Delegated Contracting," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113069, Verein für Socialpolitik / German Economic Association.
    12. Hubbard, Timothy P. & Paarsch, Harry J., 2009. "Investigating bid preferences at low-price, sealed-bid auctions with endogenous participation," International Journal of Industrial Organization, Elsevier, vol. 27(1), pages 1-14, January.
    13. Hans Peter Grüner & Thomas Tröger, 2019. "Linear Voting Rules," Econometrica, Econometric Society, vol. 87(6), pages 2037-2077, November.
    14. Yumiko Baba, 2013. "A Note On Dutch Auctions With Time Credits," Working Papers e053, Tokyo Center for Economic Research.
    15. Ginzburg, Boris, 2019. "A Simple Model of Competitive Testing," MPRA Paper 99463, University Library of Munich, Germany.
    16. Bognar, Katalin & Börgers, Tilman & Meyer-ter-Vehn, Moritz, 2015. "An optimal voting procedure when voting is costly," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 1056-1073.
    17. Xiaoyong Cao & Guofu Tan & Guoqiang Tian & Okan Yilankaya, 2018. "Equilibria in second-price auctions with private participation costs," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(2), pages 231-249, March.

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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