Abstract
We study the optimal auction problem with participation costs in the symmetric independent private values setting, where bidders know their valuations when they make independent participation decisions. After characterizing the optimal auction in terms of participation cutoffs, we provide an example where it is asymmetric. We then investigate when the optimal auction will be symmetric/asymmetric and the nature of possible asymmetries. We also show that, under some conditions, the seller obtains her maximal profit in an (asymmetric) equilibrium of an anonymous second price auction. In general, the seller can also use non-anonymous auctions that resemble the ones that are actually observed in practice.
| Original language | English |
|---|---|
| Article number | 24 |
| Journal | B.E. Journal of Theoretical Economics |
| Volume | 9 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - 2009 |
| Externally published | Yes |
Funding
KEYWORDS: optimal auctions, participation costs, endogenous entry, asymmetry, bidding preferences ∗Earlier versions of this paper circulated under the title “Optimal Auctions with Participation Costs.” Two referees and a Co-Editor provided many useful comments and suggestions, for which we are grateful. We thank seminar audiences at Bilkent University, Bogazic¸i University, HEC Paris, Hong Kong University, Hong Kong University of Science and Technology, Indian Statistical Institute (Delhi Centre), Koc¸ University, Sabanci University, The University of Adelaide, The University of British Columbia, The University of Melbourne, The University of New South Wales, The University of Texas at Austin, The University of Western Ontario, University of Southern California, and at various conferences and workshops. We thank Social Sciences and Humanities Research Council of Canada for research support.
Keywords
- Asymmetry
- Bidding preferences
- Endogenous entry
- Optimal auctions
- Participation costs
ASJC Scopus subject areas
- General Economics,Econometrics and Finance