Auctions when Bidders Prepare by Investing in Ideas

9 Pages Posted: 29 Oct 1999  

Thomas D. Jeitschko

Michigan State University - Department of Economics

Elmar Wolfstetter

Humboldt University of Berlin - Faculty of Economics; Korea University - College of Economics and Commerce

Date Written: March 2000

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.

JEL Classification: D44

Suggested Citation

Jeitschko, Thomas D. and Wolfstetter, Elmar, Auctions when Bidders Prepare by Investing in Ideas (March 2000). CESifo Working Paper Series No. 258. Available at SSRN: https://ssrn.com/abstract=181570

Thomas D. Jeitschko (Contact Author)

Michigan State University - Department of Economics ( email )

110 Marshall-Adams Hall
East Lansing, MI 48824
United States
517-355-8302 (Phone)
517-432-1068 (Fax)

HOME PAGE: http://www.msu.edu/~jeitschk/

Elmar G. Wolfstetter

Humboldt University of Berlin - Faculty of Economics ( email )

Institut für Wirtschaftstheorie I
Spandauer Strasse 1
Berlin
Germany
+49 30 2093 5652/3 (Phone)
+49 30 2093 5619 (Fax)

HOME PAGE: http://www.wiwi.hu-berlin.de/wt1/

Korea University - College of Economics and Commerce ( email )

Anam-dong, Sungbuk-Ku
Seoul, 136-701
Korea

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