Auctions with an Invitation Cost

Erik Ekström and Carl Lindberg ()
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Erik Ekström: Department of Mathematics, Uppsala University, Box 256, 75105 Uppsala, Sweden
Carl Lindberg: Sigmastocks A3, Södra Hamngatan 19–21, 41114 Göteburg, Sweden

International Game Theory Review (IGTR), 2021, vol. 23, issue 01, 1-16

Abstract: We consider an auction in which a seller invites potential buyers to a sealed-bid first-price auction, without disclosing to the buyers the number of extended invitations. In the presence of a fixed invitation cost for each invited bidder, the whole auction can be described as a game, where the set of players consists of all bidders together with the seller. In a setting with fully observable common values we show the existence of a Nash equilibrium in mixed strategies. In this equilibrium, the seller should invite precisely one or two potential buyers with certain probabilities, and each invited buyer should place a randomized bid according to a certain distribution.

Keywords: Game theory; auctions; unknown competition; randomized strategies (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1142/S0219198920500140

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