Why a simple second-price auction induces efficient endogenous entry

DOI10.1007/S11238-007-9092-9MaRDI QIDQ1025649zbMATH OpenOpenAlexFDO

Authors Jingfeng Lu

Publication date 19 June 2009

Published in Theory and Decision (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1007/s11238-007-9092-9

zbMATH Keywords

Bayesian Nash equilibriumefficient auctionendogenous entryentry costssecond price auction

Mathematics Subject Classification ID

(n)-person games, (n>2) (91A06) Noncooperative games (91A10) Auctions, bargaining, bidding and selling, and other market models (91B26)

Review text

The author presents a new method to study ex ante efficient auctions in the setting of \textit{M. Stegeman} [J. Econ. Theory 71, No. 1, 228--259 (1996; Zbl 0864.90038)], where bidders who know their valuation are faced with entry costs. He gives a new proof of the following result by Stegeman: the ex ante efficient allocation can always be Bayesian implementable through the second-price auction with a reserve price equal to seller's valuation and no entry fee. Due to the applied approach, the author is able to solve the problem of indeterminacy in entry for this type of auction by proposing an alternative second-price auction that implements uniquely the efficient entry through dominant strategy. This alternative is a modified second-price auction with a contingent entry subsidy for each bidder that equals his entry cost, and a minimum price that equals the efficient entry threshold for him.

Recommendations

• Participation costs and efficient auctions
• Second-price auctions with private entry costs
• Auctions with endogenous entry
• Auctions with flexible entry fees: a note
• Auctions with selective entry

Cites work

• Auction design with opportunity cost
• Auctions with a stochastic number of bidders
• Competitive bidding with entry costs
• Entry and R{\&}D in procurement contracting
• Equilibria in second price auctions with participation costs
• scientific article; zbMATH DE number 4035521 (Why is no real title available?)
• Information Acquisition and Efficient Mechanism Design
• Information Acquisition in Auctions
• Mid-auction information acquisition
• Optimal auctions revisited
• Participation constraints in the Vickrey auction
• Participation costs and efficient auctions
• Rational Expectations, Information Acquisition, and Competitive Bidding

Cited in

(6)

• Intuitive and noncompetitive equilibria in weakly efficient auctions with entry costs
• Entry coordination in auctions and social welfare: An experimental investigation
• Endogenous entry in auctions with negative externalities
• Optimal bidding in auctions from a game theory perspective
• Auctions with flexible entry fees: a note
• Self-enforced collusion through comparative cheap talk in simultaneous auctions with entry

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