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- Publisher Website: 10.1016/j.jet.2020.105041
- Scopus: eid_2-s2.0-85082752319
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Article: Costly Auction Entry, Royalty Payments, and the Optimality of Asymmetric Designs
Title | Costly Auction Entry, Royalty Payments, and the Optimality of Asymmetric Designs |
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Authors | |
Keywords | Auctions with participation costs Royalty payments Optimal auctions Asymmetric auctions Heterogeneous bidders |
Issue Date | 2020 |
Publisher | Academic Press. The Journal's web site is located at http://www.elsevier.com/locate/jet |
Citation | Journal of Economic Theory, 2020, v. 188, p. article no. 105041 How to Cite? |
Abstract | We analyze optimal auction mechanisms when bidders base costly entry decisions on their valuations, and bidders pay with a fixed royalty rate plus cash. With sufficient valuation uncertainty relative to entry costs, the optimal mechanism features asymmetry so that bidders enter with strictly positive but different (ex-ante) probabilities. When bidders are ex-ante identical, higher royalty rates—which tie payments more closely to bidder valuations—increase the optimal degree of asymmetry in auction design, further raising revenues. When bidders differ ex-ante in entry costs, the seller favors the low cost entrant; whereas when bidders have different valuation distributions, the seller favors the weaker bidder if entry costs are low, but not if they are high. Higher royalty rates cause the seller to favor the weaker bidder by less, and the strong bidder by more. |
Persistent Identifier | http://hdl.handle.net/10722/282477 |
ISSN | 2023 Impact Factor: 1.4 2023 SCImago Journal Rankings: 3.218 |
ISI Accession Number ID | |
Grants |
DC Field | Value | Language |
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dc.contributor.author | Bernhardt, D | - |
dc.contributor.author | Liu, T | - |
dc.contributor.author | Sogo, T | - |
dc.date.accessioned | 2020-05-15T05:28:37Z | - |
dc.date.available | 2020-05-15T05:28:37Z | - |
dc.date.issued | 2020 | - |
dc.identifier.citation | Journal of Economic Theory, 2020, v. 188, p. article no. 105041 | - |
dc.identifier.issn | 0022-0531 | - |
dc.identifier.uri | http://hdl.handle.net/10722/282477 | - |
dc.description.abstract | We analyze optimal auction mechanisms when bidders base costly entry decisions on their valuations, and bidders pay with a fixed royalty rate plus cash. With sufficient valuation uncertainty relative to entry costs, the optimal mechanism features asymmetry so that bidders enter with strictly positive but different (ex-ante) probabilities. When bidders are ex-ante identical, higher royalty rates—which tie payments more closely to bidder valuations—increase the optimal degree of asymmetry in auction design, further raising revenues. When bidders differ ex-ante in entry costs, the seller favors the low cost entrant; whereas when bidders have different valuation distributions, the seller favors the weaker bidder if entry costs are low, but not if they are high. Higher royalty rates cause the seller to favor the weaker bidder by less, and the strong bidder by more. | - |
dc.language | eng | - |
dc.publisher | Academic Press. The Journal's web site is located at http://www.elsevier.com/locate/jet | - |
dc.relation.ispartof | Journal of Economic Theory | - |
dc.subject | Auctions with participation costs | - |
dc.subject | Royalty payments | - |
dc.subject | Optimal auctions | - |
dc.subject | Asymmetric auctions | - |
dc.subject | Heterogeneous bidders | - |
dc.title | Costly Auction Entry, Royalty Payments, and the Optimality of Asymmetric Designs | - |
dc.type | Article | - |
dc.identifier.email | Liu, T: tjliu@hku.hk | - |
dc.identifier.authority | Liu, T=rp02221 | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1016/j.jet.2020.105041 | - |
dc.identifier.scopus | eid_2-s2.0-85082752319 | - |
dc.identifier.hkuros | 309868 | - |
dc.identifier.volume | 188 | - |
dc.identifier.spage | article no. 105041 | - |
dc.identifier.epage | article no. 105041 | - |
dc.identifier.isi | WOS:000538935900007 | - |
dc.publisher.place | United States | - |
dc.relation.project | Optimal Securities Auctions with Entry Costs | - |
dc.identifier.issnl | 0022-0531 | - |