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Mission impossible: Buy price fails to signal information

Toshihiro Tsuchihashi ()
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Toshihiro Tsuchihashi: Daito Bunka University

Economics Bulletin, 2019, vol. 39, issue 1, 431-434

Abstract: According to the well-known linkage principle, a seller benefits from revealing information relevant to bidders' payoffs in auctions. For this purpose, the seller needs a signaling device to credibly transmit her private information to bidders. One natural candidate for such a device is a buy price. In this paper, I investigate the theoretical possibility that the buy price may credibly signal the seller's private information in second-price auctions. However, I find that the buy price cannot serve as a signaling device. There exists no separating equilibrium such that a buy price signals the seller's private information.

Keywords: buy price; signaling; second price auction (search for similar items in EconPapers)
JEL-codes: D8 (search for similar items in EconPapers)
Date: 2019-03-16
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