Costly auction entry, royalty payments, and the optimality of asymmetric designs (Q785528): Difference between revisions
From MaRDI portal
Set profile property. |
Set OpenAlex properties. |
||
Property / OpenAlex ID | |||
Property / OpenAlex ID: W2970076242 / rank | |||
Normal rank |
Revision as of 22:40, 19 March 2024
scientific article
Language | Label | Description | Also known as |
---|---|---|---|
English | Costly auction entry, royalty payments, and the optimality of asymmetric designs |
scientific article |
Statements
Costly auction entry, royalty payments, and the optimality of asymmetric designs (English)
0 references
7 August 2020
0 references
This paper investigates the optimal design of auctions when bidders base costly entry decisions on their valuations, and bidders pay with a fixed royalty rate plus cash. After a serious and precise analysis of the intrinsic properties of this mechanism, the authors substantiate their research and conclusions in the following areas: with sufficient valuation uncertainty relative to entry costs, the optimal mechanism features asymmetry so that bidders enter with strictly positive but different (ex-ante) probabilities; when bidders are ex-ante identical, higher royalty rates-which tie payments more closely to bidder types-increase the optimal degree of asymmetry in auction design, allowing the seller to raise revenues further; when bidders differ ex-ante in entry costs, the seller favors the low cost entrant; whereas when bidders have different valuation distributions, the seller favors the weaker bidder if entry costs are low, but not if they are high. The authors provide sufficient conditions under which a seller should restrict entry to a single bidder, setting a take-it-or-leave-it price. The reader can find the precise mathematical proofs of the stated statements in the specialized Section Appendix A.
0 references
auctions with participation costs
0 references
royalty payments
0 references
optimal auctions
0 references
asymmetric auctions
0 references
heterogeneous bidders
0 references