Tuesday, October 25, 2011

Endogenous Competition Alters the Structure of Optimal Auctions

Posted by D. Daniel Sokol

Ronald M Harstad (The Institute of Social and Economic Research Osaka University) argues that Endogenous Competition Alters the Structure of Optimal Auctions.

ABSTRACT: Potential bidders respond to a sellerfs choice of auction mechanism for a common-value or affiliated-values asset by endogenous decisions whether to incur an information-acquisition cost (and observe a private estimate), or forgo competing. Privately informed participants decide whether to incur a bid-preparation cost and pay an entry fee, or cease competing. Auction rules and information flows are quite general; participation decisions may be simultaneous or sequential. The resulting revenue identity for any auction mechanism implies that optimal auctions are allocatively efficient; a nontrivial reserve price is revenue-inferior. Optimal auctions are otherwise contentless: any auction that sells without reserve becomes optimal by adjusting any one of the continuous, spanning parameters, e.g., the entry fee. Sellerfs surplus-extracting tools are now substitutes, not complements. Many econometric studies of auction market! s are seen to be flawed in their identification of the number of bidders.

https://lawprofessors.typepad.com/antitrustprof_blog/2011/10/endogenous-competition-alters-the-structure-of-optimal-auctions-.html

| Permalink

TrackBack URL for this entry:

https://www.typepad.com/services/trackback/6a00d8341bfae553ef015435b3bd4b970c

Listed below are links to weblogs that reference Endogenous Competition Alters the Structure of Optimal Auctions :

Comments

Post a comment