Auctions when Bidders Prepare by Investing in Ideas
Thomas D. Jeitschko
Michigan State University - Department of Economics
Humboldt University of Berlin - Faculty of Economics; Korea University - College of Economics and Commerce
CESifo Working Paper Series No. 258
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
Date posted: October 29, 1999
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