Auctions with Downstream Interaction among Buyers
We study auctions for an invisible object. The outcome of the auction influences the future interaction among agents. The impact of that interaction on agent's is assumed to be a function of the agent's valuations. While agent's i valuation is private information to i, the other valuations are not observeable by i at the time of the auction. We derive equilibrium bidding strategies for second price auctions in which the seller may impose reserve prices or entry fees, while pointing out the differences between the cases where impacts (which we call externalities) are positive or negative. Finally, we study the effect of reserve prices and entry fees on the seller's revenue.
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|Date of creation:||01 Jan 1997|
|Note:||Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.|
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