Imperfect competition in online auctions

DOI10.1016/J.JMATECO.2022.102730MaRDI QIDQ2092772zbMATH OpenOpenAlexFDO

Authors Alexander Maslov, Jesse A. Schwartz

Publication date 3 November 2022

Published in Journal of Mathematical Economics (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/j.jmateco.2022.102730

zbMATH Keywords

competing auctionsInternet auctionsrevenue equivalence

Mathematics Subject Classification ID

Auctions, bargaining, bidding and selling, and other market models (91B26) Matching models (91B68)

Review text

The article examines the online markets where two sellers sequentially choose reserve prices and then hold ascending auctions. Buyers can bid in both auctions and can switch between them as frequently as they like. It is shown that the first-arriving seller chooses a reserve price just low enough to safeguard against being undercut by the second seller, and in the equilibrium the first-arriving seller makes more profit than the second-arriving seller. Both reserve prices are set above the marginal costs of the sellers resulting in inefficiency. The authors' results apply to both centralized seller-offer dual auctions and a decentralized sales procedure in which sellers set reserve prices sequentially. The main result is contained in the following statement: In a simultaneous pricing game between two sellers in a seller-offer double auction where buyers bid sincerely: (i) no pure strategy Nash equilibrium exists; (ii) a mixed strategy Nash equilibrium does exist; (iii) in every mixed strategy Nash equilibrium, each seller's support has supremum equal to \(r_2^{\ast}\), neither places any probability mass on \(r_2^{\ast}\), and each seller earns an expected payoff of \(\pi_2(r_2^{\ast})\). Section 5 provides a numerical example with three buyers whose values are distributed uniformly.

Recommendations

• On second-price auctions and imperfect competition.
• Sequentially optimal auctions
• Internet auctions with many traders
• Equilibrium reserve prices in sequential ascending auctions
• Mechanism Design by Competing Sellers

Cites work

• An empirical investigation of efficiency and price uniformity in competing auctions
• Collusive behavior in noncooperative epsilon-equilibria of oligopolies with long but finite lives
• Competing auctions: finite markets and convergence
• Competition among auctioneers in large markets
• Competition among sellers who offer auctions instead of prices
• Game theory
• Internet auctions with many traders
• Mechanism Design by Competing Sellers
• Optimal Auction Design
• Price Leadership
• Sequential capacity and price choices in a duopoly model with demand uncertainty
• The Existence of Equilibrium in Discontinuous Economic Games, I: Theory

Cited in

(11)

• Competition in online markets with auctions and posted prices
• Capacity and entry issues in online exchanges
• Seller Search and Market Outcomes in Online Auctions
• The determinants of price in online auctions: more evidence from unbalanced panel data
• scientific article; zbMATH DE number 6314686 (Why is no real title available?)
• Buy prices in online auctions: Irrationality on the internet?
• Online-Offline Competition with Heterogeneous Consumers: An Example for No Existence of Pure Strategy Nash Equilibrium
• Competing auctions with non-identical objects
• Simultaneous bidding in competing auctions
• A note on Peters and Severinov, ``Competition among sellers who offer auctions instead of prices
• Competition through entry fees between auctions for differentiated objects

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