Cao, Xiaoyong and Tian, Guoqiang (2012): Second-Price Auctions with Different Participation Costs. Forthcoming in: Journal of Economics & Management Strategy
Download (289kB) | Preview
This paper studies equilibria of second price auctions in independent private value envi- ronments with different participation costs. Two types of equilibria are identified: monotonic equilibria in which a bidder with a lower participation cost results in a lower cutoff for sub- mitting a bid, and non-monotonic equilibria in which a lower participation cost results in a higher cutoff. We show that there always exists a monotonic equilibrium, and further, that the monotonic equilibrium is unique for either concave distribution functions or strictly convex distribution functions with non-increasing reverse hazard rates. There exist non- monotonic equilibria when the distribution functions are strictly convex and the difference of the participation costs is sufficiently small. We also provide comparative static analysis and study the limiting properties of equilibria when the difference in bidders’ participation costs approaches zero.
|Item Type:||MPRA Paper|
|Original Title:||Second-Price Auctions with Different Participation Costs|
|Keywords:||Private Values, Differentiated Participation Costs, Second Price Auctions, Non-monotonic Equilibrium, Existence and Uniqueness of Equilibrium|
|Subjects:||D - Microeconomics > D4 - Market Structure, Pricing, and Design > D44 - Auctions
D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency ; Cost-Benefit Analysis
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games
C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C62 - Existence and Stability Conditions of Equilibrium
|Depositing User:||Guoqiang Tian|
|Date Deposited:||12. Sep 2012 12:53|
|Last Modified:||26. Sep 2015 12:46|
Cai, H., J. Henderson and Q. Zhang, 2010, “China’s Land Market Auctions: Evidence of Corruption”,Working Paper.
Cao, X. and G. Tian, 2010, “Equilibria in First Price Auctions with Participation Costs”, Games and Economic Behavior, 69, 258-273.
Baye, M., D. Kovenock and G. Vries, 1996, “The All-pay Auction with Complete Information”, Economic Theory, 8, 291-305.
Campbell, C.M., 1998, “Coordination in Auctions with Entry”,Journal of Economic Theory, 82, 425-450.
Chakraborty, I. and G. Kosmopoulou, 2001, “Auctions with Endogenous Entry”,Economics Letters, 72, 195-200.
Cremer, J., Y. Spiegel and C. Zheng, 2009, “Auctions with Costly Information Acquisition”, Economic Theory, 38, 41-72.
Engelbrecht-Wiggans, R., 2001, “The Effect of Entry and Information Costs on Oral versus Sealed-bid Auctions”,Economics Letters, 70, 195-202.
Green, J. and J.J. Laffont, 1984, “Participation Constraints in the Vickrey Auction”,Economics Letters, 16, 31-36.
Harstad, R.M., Kagel, J.H. and D. Levin, 1990, “Equilibrium Bid Functions for Auctions with an Uncertain Number of Bidders”,Economics Letters, 33, 35-40.
Kaplan, T.R. and A. Sela, 2006, “Second Price Auctions with Private Entry Costs”,Working Paper.
Levin, D. and J.L. Smith, 1994, “Equilibrium in Auctions with Entry”,American Economic Review, 84, 585-599.
Levin, D. and J.L. Smith, 1996, “Ranking Auctions with Risk Averse Bidders”,Journal of Economic Theory, 68, 549-561.
Lu, J., 2009, “Auction Design with Opportunity Cost”,Economic Theory, 38, 73-103.
Lu, J. and Y. Sun, 2007, “Efficient Auctions with Private Participation Costs”, Working Paper.
McAfee, R.P. and J. McMillan, 1987, “Auctions with Entry”,Economics Letters, 23, 343-347.
McAfee, R.P. and J. McMillan, 1987, “Auctions with a Stochastic Number of Bidders”,Journal of Economic Theory, 43, 1-19.
Menezes, F.M. and P.K. Monterio, 2000, “Auctions with Endogeneous Participation”,Review of Economic Design, 5, 71-89.
Milgrom, P.R. and J.W. Weber, 1982, “A Theory of Auctions and Competitive Bidding”, Econometrica, 50, 1089-1122.
Miralles, A., 2006, “Intuitive and noncompetitive equilibria in weakly efficient auctions with entry costs”,Mathematical Social Science, 56, 448-455.
Myerson, R.B., “Optimal Auction Design”, 1981,Mathematics of Operations Research, 6,58-73.
Persico. P., 2000, “Information Acquisition in Auctions”,Econometrica, 68, 135-148.
Samuelson, W.F., 1985, “Competitive Bidding with Entry Costs”,Economics Letters, 17, 53-57.
Stegeman, M., 1996, “Participation Costs and Efficient Auctions”,Journal of Economic Theory,71, 228-259.
Tan, G. and O. Yilankaya, 2006, “Equilibria in Second Price Auctions with Participation Costs”,Journal of Economic Theory, 130, 205-219.
Vickrey, W., 1961, “Counterspeculation, Auctions, and Competitive Sealed Tenders”,Journal of Finance, 16, 8-37.