Optimal search auctions

Charles Zhoucheng Zheng, Jacques Crémer () and Yossef Spiegel

No 615, Econometric Society 2004 North American Summer Meetings from Econometric Society

Abstract: We study the design of profit maximizing single unit auctions under the assumption that the seller needs to incur costs to contact prospective bidders and inform them about the auction. When bidders' types are independent (with^Mpossibly bidder-specific distributions) and their valuations are possibly interdependent, the seller's problem can be reduced to a (stochastic, history-contingent) search problem in which the surplus is measured in terms of virtual utilities minus search costs. Compared to the socially efficient mechanism, the optimal mechanism features fewer participants, longer search conditional on the same set of participants, and inefficient sequence of entry. When bidders' types are correlated, the seller cannot fully extract the social surplus for sure but can extract it with an arbitrarily high probability.

Keywords: optimal auction; optimal search; endogenous entry (search for similar items in EconPapers)
JEL-codes: D44 (search for similar items in EconPapers)
Date: 2004-08-11
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Related works:
Working Paper: Optimal Search Auctions (2005)
Working Paper: Optimal Search Auctions (2005)
Journal Article: Optimal search auctions (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:ecm:nasm04:615

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