 Bid signaling in first-price royalty auctionDazhong Wang, Xinyi Xu and Xianjie Zeng Economics Letters, 2022, vol. 216, issue C Abstract: It is common that seller’s post-auction input affects winner’s valuation in the widely used royalty auctions. This study considers bidders’ signaling incentives and seller’s choice of reserve price in the first-price royalty auction. We first characterize the unique symmetric D1 PBE in which the quasi-separating bidding strategy can be decomposed into the equilibrium bid without signaling incentive and the signaling premium. The signaling premium increases in bidder’s type, indicating that a higher type has more incentive to raise bid to induce more effort from the seller. The optimal reserve price is lower than that under the post-auction complete information scenario, which leads to a more efficient allocation and a higher payoff for the seller. The optimal reserve price is non-monotonic in royalty rate while the seller’s equilibrium payoff increases in it, and full surplus extraction is obtained when the royalty rate approaches 100%. Keywords: Royalty auction; Signaling premium; Reserve price; Royalty rate impact (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:216:y:2022:i:c:s0165176522001409 DOI: 10.1016/j.econlet.2022.110526 Access Statistics for this article Economics Letters is currently edited by Economics Letters Editorial Office More articles in Economics Letters from Elsevier |
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