Efficiency of Lowest-Unmatched Price Auctions

Jürgen Eichberger and Dmitri Vinogradov

Economics Letters, 2016, vol. 141, issue C, 98-102

Abstract: In Lowest-Unmatched Price Auctions (LUPA) all participants pay a bidding fee and the lowest bid placed by only one participant wins. Many LUPAs do not specify what happens with the item on offer if there is no unmatched bid. The item may remain with the auctioneer which may appear unfair given that the auctioneer collects the bidding fees. We show that in a symmetric Nash equilibrium of a LUPA with known prize both players and the auctioneer will have an expected profit of zero. Moreover, LUPAs may be seen as a value-revealing mechanism.

Keywords: Unmatched bid auction; Selling mechanism; Efficiency (search for similar items in EconPapers)
JEL-codes: C71 D44 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:141:y:2016:i:c:p:98-102

DOI: 10.1016/j.econlet.2016.02.012

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