Descending Price Optimally Coordinates Search

Robert Kleinberg, Bo Waggoner and E. Glen Weyl

Papers from arXiv.org

Abstract: Investigating potential purchases is often a substantial investment under uncertainty. Standard market designs, such as simultaneous or English auctions, compound this with uncertainty about the price a bidder will have to pay in order to win. As a result they tend to confuse the process of search both by leading to wasteful information acquisition on goods that have already found a good purchaser and by discouraging needed investigations of objects, potentially eliminating all gains from trade. In contrast, we show that the Dutch auction preserves all of its properties from a standard setting without information costs because it guarantees, at the time of information acquisition, a price at which the good can be purchased. Calibrations to start-up acquisition and timber auctions suggest that in practice the social losses through poor search coordination in standard formats are an order of magnitude or two larger than the (negligible) inefficiencies arising from ex-ante bidder asymmetries.

Date: 2016-03, Revised 2016-12
New Economics Papers: this item is included in nep-com and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://arxiv.org/pdf/1603.07682 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1603.07682

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().