Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/92866
Authors: 
Harstad, Ronald M.
Year of Publication: 
2011
Series/Report no.: 
ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 816
Abstract: 
Potential bidders respond to a seller's 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. Seller's surplus-extracting tools are now substitutes, not complements. Many econometric studies of auction markets are seen to be flawed in their identification of the number of bidders.
Subjects: 
optimal auctions
endegenous bidder participation
affiliated-values
common-value auctions
surplus-extracting devices
JEL: 
D44
D82
C72
Document Type: 
Working Paper

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