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Price Reveal Auctions

Author

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  • Gallice Andrea

    (ESOMAS Department, University of Turin, Torino, Italy Collegio Carlo Alberto, Via Real Collegio 30 Moncalieri, Italy)

Abstract

A price reveal auction (PRA) is a descending price auction in which the current price of the item on sale is hidden. Buyers can privately observe the price only by paying a fee, and every time an agent does so, the price falls by a predetermined amount. We show that if the number of participants, n$$n$$, is common knowledge, then in equilibrium a PRA replicates the outcome of a posted price mechanism. In particular, at most one buyer observes the price and the auction immediately finishes. In contrast, multiple entries can occur and profitability is enhanced when agents are uncertain about n$$n$$. Under some conditions, a PRA may even yield higher expected revenues than standard auction formats.

Suggested Citation

  • Gallice Andrea, 2016. "Price Reveal Auctions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 16(2), pages 485-514, June.
    • Handle: RePEc:bpj:bejtec:v:16:y:2016:i:2:p:485-514:n:4
    DOI: 10.1515/bejte-2014-0099
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    References listed on IDEAS

    as
    1. Brennan C. Platt & Joseph Price & Henry Tappen, 2010. "Pay-to-Bid Auctions," NBER Working Papers 15695, National Bureau of Economic Research, Inc.
    2. Andrea Gallice, 2009. "Lowest Unique Bid Auctions with Signals," Carlo Alberto Notebooks 112, Collegio Carlo Alberto, revised Sep 2009.
    3. Di Gaetano, Luigi, 2011. "A model of descending auction with hidden starting price and endogenous price decrease," MPRA Paper 35773, University Library of Munich, Germany.
    4. Krishna, Vijay, 2009. "Auction Theory," Elsevier Monographs, Elsevier, edition 2, number 9780123745071.
    5. Raviv, Yaron & Virag, Gabor, 2009. "Gambling by auctions," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 369-378, May.
    6. Andrea Gallice & Giuseppe Sorrenti, 2022. "Curious about the price? Consumers’ behavior in price reveal auctions," Applied Economics Letters, Taylor & Francis Journals, vol. 29(9), pages 831-834, May.
    7. Andrea Gallice, 2010. "Price Reveal Auctions on the Internet," Carlo Alberto Notebooks 147, Collegio Carlo Alberto.
    8. repec:awi:wpaper:0471 is not listed on IDEAS
    9. Amnon Rapoport & Hironori Otsubo & Bora Kim & William E. Stein, 2009. "Unique Bid Auction Games," Jena Economics Research Papers 2009-005, Friedrich-Schiller-University Jena.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Complicated auctions are more proftable
      by Economic Logician in Economic Logic on 2012-12-14 21:46:00

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    Cited by:

    1. Hinnosaar, Toomas, 2016. "Penny auctions," International Journal of Industrial Organization, Elsevier, vol. 48(C), pages 59-87.
    2. Andrea Gallice & Giuseppe Sorrenti, 2022. "Curious about the price? Consumers’ behavior in price reveal auctions," Applied Economics Letters, Taylor & Francis Journals, vol. 29(9), pages 831-834, May.
    3. Toomas Hinnosaar, 2013. "Penny Auctions are Unpredictable," Carlo Alberto Notebooks 305, Collegio Carlo Alberto.

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    More about this item

    Keywords

    price reveal auctions; pay-per-bid auctions; endogenous price decrease;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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