Auctions with Entry versus Entry in Auctions
28 Pages Posted: 14 Dec 2018
Date Written: November 21, 2018
We show that charging entry fees can sometimes dominate the benefit of recruiting additional bidders to auctions, even though the fees themselves implicitly reduce competition at the auction stage. We also highlight that admission fees and reserve prices are different instruments in a setting with uncertainty over entry costs, and that optimal mechanisms in such settings may be higher-dimensional than in Myerson (1981). Our results provide a counterpoint to the broad intuition of Bulow and Klemperer (1996) that market thickness often takes precedence over market power in auction design.
Keywords: Auctions, Entry, Reserve Prices, Entry Fees
JEL Classification: D44, D47, C78, D82
Suggested Citation: Suggested Citation