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Auctions when Bidders Prepare by Investing in IdeasThomas D. JeitschkoMichigan State University - Department of Economics Elmar WolfstetterHumboldt University of Berlin - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Korea University - College of Economics and Commerce; World Bank March 2000 CESifo Working Paper Series No. 258 Abstract: We consider auction games where, prior to the auction, bidders spend resources to increase their valuations. The market game is solved by solving an equivalent auxiliary social choice problem. We show that standard auctions are fully efficient, whereas reserve price requirements entail a double inefficiency. Moreover, we explain how optimal auctions differ from the well-known static optimum, and sketch the impact of information spillovers.
Number of Pages in PDF File: 9 JEL Classification: D44 working papers seriesDate posted: October 29, 1999Suggested CitationContact Information
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