Why Do Sellers (Usually) Prefer Auctions?

Bulow, Jeremy; Klemperer, Paul

doi:10.1257/aer.99.4.1544

Cited by 159 publications

(122 citation statements)

References 57 publications

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“…In fact, in the Appendix we show that p * k is the entry threshold used by all arriving buyers who believe that k currently participating bidders have valuations above the current price, regardless of their position in the arrival sequence. 9 Formally, the result is the following: Lemma 2. Fix k ∈ {1, .…”

Section: A Look At Bidders' Entry Decisionsmentioning

confidence: 99%

Entry Deterrence in Dynamic Second-Price Auctions

Che

Klumpp

2016

American Economic Journal: Microeconomics

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The full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details. AbstractWe examine a dynamic second-price auction with independent private values and sequential costly entry. We show that delayed revelation equilibria exist in which some buyers with sufficiently high valuations place coordinated low early bids, and bid their true valuations just prior to the end of the auction. Compared to the benchmark immediate revelation equilibrium, in which buyers bid their true values immediately after entry, fewer high-value bidders enter on expectation in some delayed revelation equilibria. We show that delayed revelation of buyer values decreases social welfare, but is necessary for bidders to have a strict participation incentive. Computations suggest that the welfare effect of delayed revelation consists primarily of transfer of surplus from the seller to bidders, while efficiency losses are relatively small.

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Section: A Look At Bidders' Entry Decisionsmentioning

confidence: 99%

Entry Deterrence in Dynamic Second-Price Auctions

Che

Klumpp

2016

American Economic Journal: Microeconomics

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“…In this equilibrium, bidder 1 enters if v 1 ≥ x 1 . Then, bidder 2, observing that bidder 1 has 3 See Samuelson (1985), McAfee and McMillan (1987), Levin and Smith (1994), Tan and Yilankaya (2006), and Bulow and Klemperer (2009) for auctions with costly entry.…”

Section: Equilibrium Cutoffs Of Entry Without Resalementioning

confidence: 99%

The impact of resale on entry in second price auctions

Che

Lee

Yang

2013

Mathematical Social Sciences

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This paper investigates the effect of resale allowance on entry strategies in a second price auction with two bidders whose entries are sequential and costly. We first characterize the perfect Bayesian equilibrium in cutoff strategies. We then show that there exists a unique threshold such that if the reseller's bargaining power is greater (less) than the threshold, resale allowance causes the leading bidder (the following bidder) to have a higher (lower) incentive on entry; i.e., the cutoff of entry becomes lower (higher). We also discuss asymmetric bidders and the original seller's expected revenue.

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“…Nonetheless, in government procurement or when selling a privately owned company (such as an NBA franchise), the auctioneer may approach bidders separately, or bidding firms/groups may go through a protracted procedure of authorizing the bid-implying a sequential timing of decisions (cf. Bulow and Klemperer, 2009).…”

Section: Introductionmentioning

confidence: 99%

Auctions and Leaks: A Theoretical and Experimental Investigation

et al. 2017

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We study first-and second-price private value auctions with sequential bidding where second movers may discover the first movers bids. There is a unique equilibrium in the first-price auction and multiple equilibria in the second-price auction. Consequently, comparative statics across price rules are equivocal. We experimentally find that in the first-price auction, leaks benefit second movers but harm first movers and sellers. Low to medium probabilities of leak eliminate the usual revenue dominance of first-price over second-price auctions. With a high probability of a leak, second-price auctions generate higher revenue.

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Why Do Sellers (Usually) Prefer Auctions?

Cited by 159 publications

References 57 publications

Entry Deterrence in Dynamic Second-Price Auctions

Entry Deterrence in Dynamic Second-Price Auctions

The impact of resale on entry in second price auctions

Auctions and Leaks: A Theoretical and Experimental Investigation

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