Auctions with Flexible Entry Fees

Tinbergen Institute Discussion Paper 09-109/1

29 Pages Posted: 12 Dec 2009

See all articles by Maarten Janssen

Maarten Janssen

University of Vienna - Faculty of Business, Economics, and Statistics

Vladimir A. Karamychev

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Emiel Maasland

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Date Written: November 30, 2009

Abstract

There is by now a large literature arguing that auctions with a variety of after-market interactions may not yield an efficient allocation of the objects for sale, especially when the bidders impose strong negative externalities upon each other. This paper argues that these inefficiencies can be avoided by asking bidders prior to the auction to submit any public payment they would like to make. These payments, so-called flexible entry fees, do not affect the allocation decision of the auctioneer. We show that auctions with flexible entry fees have a fully revealing equilibrium where bidders signal their type before the auction itself takes place.

Keywords: auctions, efficiency, entry fee, negative externality, revenue

JEL Classification: C72, D44

Suggested Citation

Janssen, Maarten C. W. and Karamychev, Vladimir A. and Maasland, Emiel, Auctions with Flexible Entry Fees (November 30, 2009). Tinbergen Institute Discussion Paper 09-109/1, Available at SSRN: https://ssrn.com/abstract=1516174 or http://dx.doi.org/10.2139/ssrn.1516174

Maarten C. W. Janssen (Contact Author)

University of Vienna - Faculty of Business, Economics, and Statistics ( email )

Vienna, A-1210
Austria

Vladimir A. Karamychev

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Emiel Maasland

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands
+31 10 408 1513 (Phone)

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