Entry Deterrence in Dynamic Second-Price Auctions

Che, X.; Klumpp, T.

Abstract

We examine a dynamic second-price auction with independent private values and sequential costly entry. We show that delayed revelation equilibria exist in which some buyers place coordinated low early bids. These buyers revise their bids to reflect their true valuations just prior to the end of the auction. Compared to the benchmark immediate revelation equilibrium, in which buyers bid their valuations immediately after entry, fewer high-value bidders enter on expectation in the delayed revelation equilibria. Delayed revelation of buyer values decreases social welfare, but is necessary for bidders to have a strict participation incentive.

Citation

Che, X., & Klumpp, T. (2016). Entry Deterrence in Dynamic Second-Price Auctions. American Economic Journal: Microeconomics, 8(2), 168-201. https://doi.org/10.1257/mic.20140137

• Journal Article Type: Article
• Acceptance Date: Jun 13, 2015
• Online Publication Date: May 31, 2016
• Publication Date: 2016-05
• Deposit Date: Jun 14, 2015
• Publicly Available Date: May 31, 2016
• Journal: American Economic Journal: Microeconomics
• Print ISSN: 1945-7669
• Electronic ISSN: 1945-7685
• Publisher: American Economic Association
• Peer Reviewed: Peer Reviewed
• Volume: 8
• Issue: 2
• Pages: 168-201
• DOI: https://doi.org/10.1257/mic.20140137
• Public URL: https://durham-repository.worktribe.com/output/1436352