Auction Platform Design and the Linkage Principle

29 Pages Posted: 21 Dec 2012 Last revised: 22 Jan 2015

See all articles by Wataru Tamura

Wataru Tamura

Nagoya University - Graduate School of Economics

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Date Written: January 22, 2015

Abstract

This paper examines an auction platform in which the monopoly platform maximizes profits by adjusting participation fees and choosing an auction format. The seller has private information on the quality of the good, and each participating buyer receives a private signal about his valuation of the good. The choice of auction format determines the allocation of trading surplus between the seller and buyers. This paper shows that when the seller's type is affiliated with the buyers' signals, the platform can charge higher participation fees on both sides by choosing a first-price or descending auction rather than a second-price or ascending auction. It also examines the effect of allowing participating buyers to acquire information on the seller's type and shows that the platform can charge higher participation fees on both sides by restricting communication between the seller and buyers.

Keywords: multi-sided platforms, auctions, market transparency, market design

JEL Classification: L21, D44, D82, D83

Suggested Citation

Tamura, Wataru, Auction Platform Design and the Linkage Principle (January 22, 2015). Available at SSRN: https://ssrn.com/abstract=2191942 or http://dx.doi.org/10.2139/ssrn.2191942

Wataru Tamura (Contact Author)

Nagoya University - Graduate School of Economics ( email )

1 Furo-cho
Chikusa-ku
Nagoya, 464-8601
Japan

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