Auctioneers sometimes prefer entry fees to extra bidders

Jiafeng Chen and Scott Kominers

International Journal of Industrial Organization, 2021, vol. 79, issue C

Abstract: We investigate a market thickness–market power tradeoff in an auction setting with endogenous entry. We find that charging admission fees can sometimes dominate the benefit of recruiting additional bidders, even though the fees themselves implicitly reduce competition at the auction stage. We also highlight that admission fees and reserve prices are different instruments in a setting with uncertainty over entry costs, and that optimal mechanisms in such settings may be more complex than simply setting a reserve price. Our results provide a counterpoint to the broad intuition of Bulow and Klemperer (1996) that market thickness often takes precedence over market power in auction design.

Keywords: Auctions; Entry; Reserve prices; Entry fees (search for similar items in EconPapers)
JEL-codes: C78 D44 D47 D82 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:79:y:2021:i:c:s0167718721000308

DOI: 10.1016/j.ijindorg.2021.102737

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