Auctions with Signaling Concerns

46 Pages Posted: 3 Nov 2020

See all articles by Olivier Bos

Olivier Bos

Université Paris II - Panthéon-Assas

Tom Truyts

KU Leuven - Faculty of Business and Economics (FEB); Facultés Universitaires Saint Louis à Bruxelles; Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Date Written: 2020

Abstract

We study a symmetric private value auction with signaling, in which the auction outcome is used by an outside observer to infer the bidders’ types. We elicit conditions under which an essentially unique D1 equilibrium bidding function exists in the second-price auction and the English auction. We establish there is no equivalence between these two auction designs, neither in bidding strategies nor in expected revenue. This is because the presence or absence of an increasing price clock, affects signaling incentives differently in both auction formats, and thereby also the bidders’ incentives to overbid their types. This leads to a strictly higher expected revenue in the second-price auction than in the English auction. Our analysis is completed by a comparison with other disclosure policies. Applications include art auctions and charity auctions.

Keywords: costly signalling, D1 criterion, social status, art auctions, charity auctions

JEL Classification: D440, D820

Suggested Citation

Bos, Olivier and Truyts, Tom, Auctions with Signaling Concerns (2020). CESifo Working Paper No. 8650, Available at SSRN: https://ssrn.com/abstract=3724065

Olivier Bos (Contact Author)

Université Paris II - Panthéon-Assas ( email )

12 place du Pantheon
Paris cedex 06, 75231
France

Tom Truyts

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Facultés Universitaires Saint Louis à Bruxelles ( email )

Boulevard du Jardin Botanique 43
Bruxelles, 1000
Belgium

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
4
Abstract Views
31
PlumX Metrics