Bid Revisions in the Buy-Price English Auction

Tilman Klumpp () and Martin Ranger
Additional contact information
Martin Ranger: Department of Business Economics and Public Policy, Indiana University Kelley School of Business

No 2006-06, Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy

Abstract: We examine ascending auctions with independent private values and a buyout option. The buyout option gives each buyer the opportunity to end the auction prematurely and acquire the object for a fixed price. We fully characterize the unique symmetric equilibrium and show that buyers with sufficiently high valuations exercise the buyout option with positive probability in equilibrium. The threshold exercise price depends on a bidder’s valuation as well as on the bid history up to this point. Thus, as the auction progresses buyers will frequently revise their thresholds. Our analysis therefore extends recent work on the buy-price English auction which assumes that bidders must commit ex-ante to an exercise threshold. In particular, thresholds are higher in our equilibrium than in previous models. If bidders are risk averse, however, the seller can still find a buyout price which increases the auction’s revenue compared to the standard English auction.

Keywords: ascending auction; risk-averse bidders; buyout option; “Buy it now” (search for similar items in EconPapers)
JEL-codes: D44 L0 (search for similar items in EconPapers)
Date: 2006-06
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:iuk:wpaper:2006-06

Access Statistics for this paper

More papers in Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy Contact information at EDIRC.
Bibliographic data for series maintained by Rick Harbaugh ().