Auctions with prestige motives

Olivier Bos and Tom Truyts ()
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Tom Truyts: CEREC, Saint-Louis University, B-1000 Brussels, Belgium; CES, KU Leuven, B-3000 Leuven, Belgium and Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium

No 2014030, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: Social status, or prestige, is an important motive for buying art or collectibles and for participation in charity auctions. We study a symmetric private value auction with prestige motives, in which the auction outcome is used by an outside observer to infer the bidders’ types. We elicit conditions under which an essentially unique D1 equilibrium bidding function exists in four auction formats: first-price, second-price, all-pay and the English auction. We obtain a strict ranking in terms of expected revenues: the first-price and all-pay auctions are dominating the English auction but are dominated by the second-price auction. Expected revenue equivalence is restored asymptotically for the number of bidders going to infinity.

Keywords: costly signaling; D1 criterion; social status; art auctions; charity auctions (search for similar items in EconPapers)
JEL-codes: D44 D82 (search for similar items in EconPapers)
Date: 2014-08-19
New Economics Papers: this item is included in nep-cul, nep-gth and nep-mic
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Working Paper: Auctions with prestige motives (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2014030

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