Deposit Requirements in Auctions

Xiaogang Che, Tong Li, Jingfeng Lu and Xiaoyong Zheng ()

American Economic Journal: Microeconomics, 2022, vol. 14, issue 4, 465-93

Abstract: We examine optimal auction design when buyers may receive future outside offers. The winning bidder may choose to default upon observing her outside offer. Under the optimal mechanism, the bidder with the highest value wins if and only if her value is above a cutoff, and the winner never defaults. The optimal auction takes the form of a second-price auction with a reserve price and a deposit by the winning bidder. Under regularity conditions, both the optimal reserve price and the deposit increase when the distribution of outside offers worsens.

JEL-codes: D44 D82 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/mic.20200206 (application/pdf)
https://www.aeaweb.org/doi/10.1257/mic.20200206.appx (application/pdf)
https://www.aeaweb.org/doi/10.1257/mic.20200206.ds (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aejmic:v:14:y:2022:i:4:p:465-93

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/mic.20200206

Access Statistics for this article

American Economic Journal: Microeconomics is currently edited by Johannes Hörner

More articles in American Economic Journal: Microeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().