Dynamic Buy-Price English Auction

28 Pages Posted: 21 Nov 2006

See all articles by Kong-Pin Chen

Kong-Pin Chen

Academia Sinica - Research Center for Humanities and Social Sciences; National Taiwan University - Department of Economics

Chien-Fu Chou

National Taiwan University - Department of Economics

Date Written: November 20, 2006

Abstract

This paper extends the results in Hidvegi et al. (2006) to the case when the number of bidders is common knowledge in an English auction with buy-out. In that case when some bidders drop out, the remaining bidders have to update their information, and change the threshold auction price at which they are willing to buy out accordingly. We explicitly model the information-updating process during auction and the implied recursive nature of the optimal buy-out strategy. Using a recursive equation linking the value functions for n- and (n+1)-bidder cases, we completely characterize the dynamic optimal buy-out strategy. It is shown that the bidders will postpone buy-out (by waiting until the aution price is higher) when some of them drop out.

Keywords: English auction, buy-out, buy-price, on-line auction

JEL Classification: C73, D42, D82, L1

Suggested Citation

Chen, Kong-Pin and Chou, Chien-Fu, Dynamic Buy-Price English Auction (November 20, 2006). Available at SSRN: https://ssrn.com/abstract=946071 or http://dx.doi.org/10.2139/ssrn.946071

Kong-Pin Chen

Academia Sinica - Research Center for Humanities and Social Sciences ( email )

RCHSS
Academia Sinica
Nankang, Taipei, 11529
Taiwan
886 2 2789 8160 (Phone)
886 2 2785 4160 (Fax)

HOME PAGE: http://idv.sinica.edu.tw/kongpin/

National Taiwan University - Department of Economics

21 Hsiu Chow Rd
Taipei, 10020
Taiwan

Chien-Fu Chou (Contact Author)

National Taiwan University - Department of Economics ( email )

21 Hsiu Chow Rd
Taipei, 10020
Taiwan

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