Auction Timing and Market Thickness

47 Pages Posted: 14 Oct 2016 Last revised: 3 Mar 2019

Date Written: February 28, 2019

Abstract

An auctioneer faces a pool of potential bidders that changes over time. She can delay the auction at a cost, in the hopes of having a thicker market later on. We identify a property of the distribution of bidder values—its “price elasticity”—that governs the distortions caused by revenue maximization: a seller inefficiently over-invests in market thickness (delays the auction excessively) if that elasticity is increasing, and under-invests if it is decreasing. We also show that dynamically responding to changes in the bidder pool is essential: committing to delay until an optimal deadline can waste most of the achievable revenue.

Keywords: Auctions, Market Design, Optimal Stopping, Monopoly, Order Statistics

JEL Classification: D42, D44, D47, D82, L12

Suggested Citation

Chaves, Isaias and Ichihashi, Shota, Auction Timing and Market Thickness (February 28, 2019). Available at SSRN: https://ssrn.com/abstract=2852034 or http://dx.doi.org/10.2139/ssrn.2852034

Isaias Chaves (Contact Author)

Northwestern University - Department of Managerial Economics and Decision Sciences (MEDS) ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Shota Ichihashi

Bank of Canada, Digital Economy and Advanced Analytics Division ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

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