Auctions with prestige motives

Olivier Bos and Tom Truyts

Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

Abstract: Social status, or prestige, is an important motive for buying art or collectibles and for participation in charity auctions. We study a symmetric private value auction with prestige motives, in which the auction outcome is used by an outside observer to infer the bidders’ types. We elicit conditions under which an essentially unique D1 equilibrium bidding function exists in four auction formats: first-price, second-price, all-pay and the English auction. We obtain a strict ranking in terms of expected revenues: the first-price and all-pay auctions are dominating the English auction but are dominated by the second-price auction. Expected revenue equivalence is restored asymptotically for the number of bidders going to infinity.

Date: 2014-07
New Economics Papers: this item is included in nep-cta, nep-ger, nep-gth and nep-mic
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Working Paper: Auctions with prestige motives (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:ces14.19

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