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Seller Competition by Mechanism Design

Damianov, D.S.



This paper analyzes a market game in which sellers offer trading mechanisms to buyers and buyers decide which seller to go to depending on the trading mechanisms offered. In a (subgame perfect) equilibrium of this market, sellers hold auctions with an efficient reserve price but charge an entry fee. The entry fee depends on the number of buyers and sellers, the distribution of buyer valuations, and the buyer cost of entering the market. As the size of the market increases, the entry fee decreases and converges to zero in the limit. We study how the surplus of buyers and sellers depends on the number of agents on each side of the market in this decentralized trading environment.


Damianov, D. (2012). Seller Competition by Mechanism Design. Economic Theory, 51(1), 105-137.

Journal Article Type Article
Publication Date 2012-09
Deposit Date Aug 27, 2013
Journal Economic Theory
Print ISSN 0938-2259
Electronic ISSN 1432-0479
Publisher Springer
Peer Reviewed Peer Reviewed
Volume 51
Issue 1
Pages 105-137
Public URL