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Second‐Price Auctions with Different Participation Costs

Second‐Price Auctions with Different Participation Costs This paper studies equilibria of second‐price auctions in independent private value environments 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 submitting a bid, and nonmonotonic 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 nonincreasing reverse hazard rates. There exist nonmonotonic 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economics & Management Strategy Wiley

Second‐Price Auctions with Different Participation Costs

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References (29)

Publisher
Wiley
Copyright
© 2013 Wiley Periodicals, Inc.
ISSN
1058-6407
eISSN
1530-9134
DOI
10.1111/jems.12004
Publisher site
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Abstract

This paper studies equilibria of second‐price auctions in independent private value environments 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 submitting a bid, and nonmonotonic 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 nonincreasing reverse hazard rates. There exist nonmonotonic 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.

Journal

Journal of Economics & Management Strategy – Wiley

Published: Mar 1, 2013

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