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Mission impossible: Buy price fails to signal information

Author

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  • Toshihiro Tsuchihashi

    (Daito Bunka University)

Abstract

According to the well-known linkage principle, a seller benefits from revealing information relevant to bidders' payoffs in auctions. For this purpose, the seller needs a signaling device to credibly transmit her private information to bidders. One natural candidate for such a device is a buy price. In this paper, I investigate the theoretical possibility that the buy price may credibly signal the seller's private information in second-price auctions. However, I find that the buy price cannot serve as a signaling device. There exists no separating equilibrium such that a buy price signals the seller's private information.

Suggested Citation

  • Toshihiro Tsuchihashi, 2019. "Mission impossible: Buy price fails to signal information," Economics Bulletin, AccessEcon, vol. 39(1), pages 431-434.
    • Handle: RePEc:ebl:ecbull:eb-19-00083
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    File URL: http://www.accessecon.com/Pubs/EB/2019/Volume39/EB-19-V39-I1-P43.pdf
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    References listed on IDEAS

    as
    1. Peyman Khezr & Flavio Menezes, 2018. "Auctions with an asking price," International Journal of Game Theory, Springer;Game Theory Society, vol. 47(4), pages 1329-1350, November.
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    6. Timothy Mathews, 2004. "The Impact of Discounting on an Auction with a Buyout Option: a Theoretical Analysis Motivated by eBay’s Buy-It-Now Feature," Journal of Economics, Springer, vol. 81(1), pages 25-52, January.
    7. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
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    Cited by:

    1. Toshihiro Tsuchihashi, 2020. "Reserve price signaling in first-price auctions with an uncertain number of bidders," International Journal of Game Theory, Springer;Game Theory Society, vol. 49(4), pages 1081-1103, December.

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    More about this item

    Keywords

    buy price; signaling; second price auction;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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