Auction timing and market thickness

Isaías N. Chaves and Shota Ichihashi

Games and Economic Behavior, 2024, vol. 143, issue C, 161-178

Abstract: A seller faces a pool of potential bidders that changes over time. She can delay the auction to have a thicker market later on. The seller imposes static distortions (through her choice of reserve prices) and dynamic distortions (through her choice of market thickness). Under a condition on types that generalizes increasing hazard rates, we show that (i) regulating only static distortions can harm efficiency; (ii) when regulating only dynamic distortions, a social planner should reduce market thickness; (iii) if a planner can affect both types of distortions, she should still choose a lower market thickness than the seller, i.e., market thickness is inefficiently high; (iv) the extent of timing disagreement between the seller and a social planner is higher when they both have to use an efficient auction than when they both have to use an optimal one.

Keywords: Auctions; Market design; Optimal stopping; Monopoly; Order statistics (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:143:y:2024:i:c:p:161-178

DOI: 10.1016/j.geb.2023.11.006

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