AUCTION DESIGN WITHOUT COMMITMENT

Hannu Vartiainen

Journal of the European Economic Association, 2013, vol. 11, issue 2, 316-342

Abstract: In anonymous platforms like the Internet, committing to honor the outcome of an auction is difficult since the seller can benefit by reauctioning the good. We argue that how information is processed within the auction mechanism is crucially important in such circumstances. In our model, the seller uses an intermediary to extract information from the buyers but is not tied to sell the good with terms that the mechanism proposes. Instead, she may reauction the good again via some other intermediary. There are no restrictions on how many times and through which mechanisms the good can be reauctioned. The buyers may also choose their outside option at any stage of the game. We argue that a sequentially rational seller can only implement a version of the English auction, in particular the popular version where bidders employ proxy bids. This is a consequence of the informational properties of the English action: it reveals just the right information for the seller to be able to commit to the mechanism.

Date: 2013
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Citations: View citations in EconPapers (28)

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Persistent link: https://EconPapers.repec.org/RePEc:bla:jeurec:v:11:y:2013:i:2:p:316-342

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