Third- and Lower-Price Auctions

Dept. of Economics, Humboldt-Universitat Berlin

9 Pages Posted: 1 Jan 2001 Last revised: 20 May 2012

See all articles by Elmar Wolfstetter

Elmar Wolfstetter

Humboldt University of Berlin - Faculty of Economics; Korea University - College of Economics and Commerce; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: July 1, 2000

Abstract

This paper solves the equilibrium bid functions of third-- and lower--price auctions. In these auctions, equilibrium bids exceed bidders' valuations, and bidders raise their bids if one moves to a lower price auction, and lower bids if the number of bidders is increased. Third-- and lower--price auctions are unappealing under risk aversion, which in turn may make them appealing when the auction is a substitute for small scale gambling, as in many Internet auctions. Moreover, in the presence of a corrupt agent-auctioneer, an auction may turn out to be third-- or lower--price, even though it was set up as a second--price or hybrid English auction.

Keywords: auctions, procurement, corruption

JEL Classification: D44, D82, H57, C72

Suggested Citation

Wolfstetter, Elmar G., Third- and Lower-Price Auctions (July 1, 2000). Dept. of Economics, Humboldt-Universitat Berlin. Available at SSRN: https://ssrn.com/abstract=253476 or http://dx.doi.org/10.2139/ssrn.253476

Elmar G. Wolfstetter (Contact Author)

Humboldt University of Berlin - Faculty of Economics ( email )

Institut für Wirtschaftstheorie I
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Berlin
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+49 30 2093 5619 (Fax)

HOME PAGE: http://www2.hu-berlin.de/wt1wo/staff/wolfstetter/index.html

Korea University - College of Economics and Commerce ( email )

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

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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