Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/118064
Authors: 
Ettinger, David
Year of Publication: 
2003
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 23.2003
Abstract: 
We consider an auction setting in which potential buyers, even if they fail to obtain the good, care about the price paid by the winner. We study the impact of these price-externalities on the first-price auction and the second-price auction in a symmetric information framework. First, we consider situations in which bidders care about the price paid independently from the identity of the winner. We prove that the first-price auction is not affected by this kind of price-externalities while the second-price auction is. In broader specifications, we observe though that the first-price auction can be affected by the presence of such price-externalities. In any case, in comparison with the first-price auction, the second-price auction exacerbates the effects of price-externalities whatever their types. Therefore, there is no revenue equivalence between the two auction formats.
Subjects: 
Auctions
revenue
allocation
externalities
toeholds
budget-constraints
JEL: 
D44
D62
G32
Document Type: 
Working Paper

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