Auction Timing and Market Thickness
47 Pages Posted: 14 Oct 2016 Last revised: 3 Mar 2019
Date Written: February 28, 2019
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: Suggested Citation