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The Economics of Vendor Bids

Onur Koska (), Ilke Onur () and Frank Stähler ()

No 1711, ERC Working Papers from ERC - Economic Research Center, Middle East Technical University

Abstract: This study scrutinizes the implications of a vendor bid in an open ascending auction with a seller of an indivisible good and many potential buyers. The seller can set a reserve price, and both the seller and the bidders have private signals and interdependent values. We show that no strictly increasing reserve price function exists in the presence of a vendor bid. We also show that a vendor bid must be large enough to be credible, and thus vendor bids may not be used in equilibrium. The vendor will exercise her vendor bid option if and only if her private signal is large enough.

Keywords: Vendor Bid; Interdependent Valuation; Open Ascending Auction (search for similar items in EconPapers)
JEL-codes: D44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-des and nep-mic
Date: 2017-10, Revised 2017-10
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http://erc.metu.edu.tr/en/system/files/menu/series17/1711.pdf First version, 2017 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:met:wpaper:1711

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