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On Discrimination in Auctions with Endogenous Entry

Author

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  • Philippe Jehiel
  • Laurent Lamy

Abstract

When entry is exogenous, strong buyers should be discriminated against weak buyers to maximize revenues (Myerson 1981). When entry is endogenous so that entrants' expected payoffs do not depend on the proposed mechanism, optimal discrimination takes a completely different form. The revenue-maximizing equilibrium requires that there should be no discrimination with respect to entrants irrespective of their ex ante characteristics. Besides, those buyers who always participate should be discriminated against entrants independently of their strength. These predictions are independent of the equilibrium selection when the number of potential entrants grows large. The optimality of first-price auctions is also discussed. (JEL D44, H57)

Suggested Citation

  • Philippe Jehiel & Laurent Lamy, 2015. "On Discrimination in Auctions with Endogenous Entry," American Economic Review, American Economic Association, vol. 105(8), pages 2595-2643, August.
    • Handle: RePEc:aea:aecrev:v:105:y:2015:i:8:p:2595-2643
    Note: DOI: 10.1257/aer.20131580
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    Cited by:

    1. Philippe Jehiel & Laurent Lamy, 2018. "A Mechanism Design Approach to the Tiebout Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 126(2), pages 735-760.
    2. Barbosa, Klenio & Boyer, Pierre C., 2021. "Discrimination in Dynamic Procurement Design with Learning-by-doing," International Journal of Industrial Organization, Elsevier, vol. 77(C).
    3. Alcalde, José & Dahm, Matthias, 2020. "Affirmative Action Through Endogenous Set-Asides," QM&ET Working Papers 20-1, University of Alicante, D. Quantitative Methods and Economic Theory.
    4. Guillaume Plantin & Jean Tirole, 2018. "Marking to Market versus Taking to Market," American Economic Review, American Economic Association, vol. 108(8), pages 2246-2276, August.
    5. Chiappinelli, Olga & Seres, Gyula, 2024. "Optimal discounts in green public procurement," Economics Letters, Elsevier, vol. 238(C).
    6. Yeon-Koo Che & Elisabetta Iossa & Patrick Rey, 2021. "Prizes versus Contracts as Incentives for Innovation [Subgame Perfect Implementation Under Information Perturbations]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(5), pages 2149-2178.
    7. Boulatov, Alexei & Severinov, Sergei, 2021. "Optimal and efficient mechanisms with asymmetrically budget constrained buyers," Games and Economic Behavior, Elsevier, vol. 127(C), pages 155-178.
    8. Matilde Cappelletti & Leonardo M. Giuffrida, 2024. "Targeted Bidders in Government Tenders," CESifo Working Paper Series 11142, CESifo.
    9. José Alcalde & Matthias Dahm, "undated". "Supplier Diversity before the Time of Cholera," Discussion Papers in Economics 20/07, Division of Economics, School of Business, University of Leicester.
    10. Philippe Jehiel & Laurent Lamy, 2020. "On the Benefits of Set-Asides," Journal of the European Economic Association, European Economic Association, vol. 18(4), pages 1655-1696.
    11. Francesco De Sinopoli & Claudia Meroni, 2022. "Poisson voting games under proportional rule," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 58(3), pages 507-526, April.
    12. Seung Han Yoo, 2020. "Optimal Influence Sale," Discussion Paper Series 2002, Institute of Economic Research, Korea University.
    13. Bergemann, Dirk & Brooks, Benjamin & Morris, Stephen, 2020. "Countering the winner's curse: optimal auction design in a common value model," Theoretical Economics, Econometric Society, vol. 15(4), November.
    14. Francesco De Sinopoli & Claudia Meroni, 2019. "Poisson voting games: proportional rule," Working Papers 11/2019, University of Verona, Department of Economics.
    15. Cole, Matthew T. & Davies, Ronald B. & Kaplan, Todd, 2017. "Protection in government procurement auctions," Journal of International Economics, Elsevier, vol. 106(C), pages 134-142.
    16. repec:spo:wpmain:info:hdl:2441/7pu0mfr14h9ba9rsrotsskha8c is not listed on IDEAS
    17. Alcalde, José & Dahm, Matthias, 2024. "On the trade-off between supplier diversity and cost-effective procurement," Journal of Economic Behavior & Organization, Elsevier, vol. 217(C), pages 63-90.
    18. Gian Luigi Albano & Berardino Cesi & Alberto Iozzi, 2023. "Teaching an old dog a new trick: Reserve price and unverifiable quality in repeated procurement," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 32(2), pages 377-399, April.
    19. Kirkegaard, René, 2022. "Efficiency in asymmetric auctions with endogenous reserve prices," Games and Economic Behavior, Elsevier, vol. 132(C), pages 234-239.
    20. repec:hal:spmain:info:hdl:2441/7pu0mfr14h9ba9rsrotsskha8c is not listed on IDEAS
    21. Chen, Jiafeng & Kominers, Scott Duke, 2021. "Auctioneers sometimes prefer entry fees to extra bidders," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    22. Agastya, Murali & Feng, Xin & Lu, Jingfeng, 2023. "Auction design with shortlisting when value discovery is covert," Journal of Mathematical Economics, Elsevier, vol. 107(C).
    23. Pierre-Henri Morand & François Marechal, 2023. "Achats publics responsables et achat local : enseignements des données ouvertes françaises," Post-Print hal-03842464, HAL.

    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement

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