English Auctions with Reentry

40 Pages Posted: 3 Sep 2001


The English auction is usually modeled as an open continuously ascending price auction in which bidders choose when to drop out but, once they do so, are forbidden from reentering. It is known that this auction allocates a single object efficiently in many but not all circumstances. In particular, if there are three or more bidders with interdependent values, the English auction may not be efficient. This paper considers a modification of the standard model in which bidders can exit and reenter at will. The main result is that the English auction with reentry has an efficient equilibrium under weak conditions. These are much weaker than the conditions under which the standard English auction is efficient. Thus the modification is not only a more realistic model of the real-world auction but has superior theoretical properties. The failure of the English auction to allocate efficiently stems not from some defect in the institution per se but rather from the way it has been traditionally modeled as a game.

Keywords: Auction, English auction, Efficient auction, English auction with reentry.

JEL Classification: D44

Suggested Citation

Izmalkov, Sergei, English Auctions with Reentry. Available at SSRN: https://ssrn.com/abstract=280296 or http://dx.doi.org/10.2139/ssrn.280296

Sergei Izmalkov (Contact Author)

New Economic School ( email )

100A Novaya Street
Moscow, Skolkovo 143026

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