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Optimal advertising of auctions

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  • Szech, Nora

Abstract

We study a symmetric independent private values auction model where the revenue-maximizing seller faces a cost cn of attracting n bidders to the auction. If the distribution of valuations possesses an increasing failure rate (IFR), the seller overinvests in attracting bidders compared to the social optimum. Conversely, if the distribution is DFR, the seller underinvests compared to the social optimum. If the distribution of valuations becomes more dispersed, both, a revenue- and a welfare-maximizing seller, attract more bidders.

Suggested Citation

  • Szech, Nora, 2011. "Optimal advertising of auctions," Journal of Economic Theory, Elsevier, vol. 146(6), pages 2596-2607.
    • Handle: RePEc:eee:jetheo:v:146:y:2011:i:6:p:2596-2607
    DOI: 10.1016/j.jet.2011.10.010
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    References listed on IDEAS

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    1. Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, vol. 86(1), pages 180-194, March.
    2. Moldovanu, Benny & Sela, Aner & Shi, Xianwen, 2008. "Competing auctions with endogenous quantities," Journal of Economic Theory, Elsevier, vol. 141(1), pages 1-27, July.
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    8. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-599, June.
    9. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
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    Citations

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    Cited by:

    1. Christian Ewerhart, 2013. "Regular type distributions in mechanism design and $$\rho $$ -concavity," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 53(3), pages 591-603, August.
    2. Dizdar, Deniz & Moldovanu, Benny & Szech, Nora, 2019. "The feedback effect in two-sided markets with bilateral investments," Journal of Economic Theory, Elsevier, vol. 182(C), pages 106-142.
    3. Schweizer, Nikolaus & Szech, Nora, 2015. "A quantitative version of Myerson regularity," Working Paper Series in Economics 76, Karlsruhe Institute of Technology (KIT), Department of Economics and Management.
    4. Schweizer, Nikolaus & Szech, Nora, 2017. "Revenues and welfare in auctions with information release," Journal of Economic Theory, Elsevier, vol. 170(C), pages 86-111.
    5. Wu, Haoyang, 2022. "A type-adjustable mechanism where the designer may obtain more payoffs by optimally controlling distributions of agents' types," MPRA Paper 113150, University Library of Munich, Germany.
    6. Fang, Rui & Li, Xiaohu, 2015. "Advertising a second-price auction," Journal of Mathematical Economics, Elsevier, vol. 61(C), pages 246-252.
    7. Stephan Lauermann & Asher Wolinsky, 2024. "Auctions with Frictions: Recruitment, Entry, and Limited Commitment," ECONtribute Discussion Papers Series 288, University of Bonn and University of Cologne, Germany.
    8. Kirkegaard, René, 2014. "Ranking asymmetric auctions: Filling the gap between a distributional shift and stretch," Games and Economic Behavior, Elsevier, vol. 85(C), pages 60-69.
    9. Dizdar, Deniz & Moldovanu, Benny & Szech, Nora, 2017. "The multiplier effect in two-sided markets with bilateral investments," Working Paper Series in Economics 109, Karlsruhe Institute of Technology (KIT), Department of Economics and Management.
    10. Minbo Xu & Daniel Z. Li, 2019. "Equilibrium competition, social welfare and corruption in procurement auctions," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 53(3), pages 443-465, October.
    11. Schweizer, Nikolaus & Szech, Nora, 2015. "The quantitative view of Myerson regularity," Discussion Papers, Research Unit: Economics of Change SP II 2015-307, WZB Berlin Social Science Center.
    12. Rui Fang & Xiaohu Li, 2017. "Nonparametric tests for strictly increasing virtual valuations," Journal of Applied Statistics, Taylor & Francis Journals, vol. 44(6), pages 1122-1136, April.
    13. Stephan Lauermann & Asher Wolinsky, 2024. "Auctions with Frictions: Recruitment, Entry, and Limited Commitment," CRC TR 224 Discussion Paper Series crctr224_2024_519, University of Bonn and University of Mannheim, Germany.
    14. Li, Daniel Z., 2017. "Ranking equilibrium competition in auctions with participation costs," Economics Letters, Elsevier, vol. 153(C), pages 47-50.
    15. Haitian Xie, 2023. "Grenander-type Density Estimation under Myerson Regularity," Papers 2305.09052, arXiv.org.
    16. Chaves, Isaías N. & Ichihashi, Shota, 2024. "Auction timing and market thickness," Games and Economic Behavior, Elsevier, vol. 143(C), pages 161-178.
    17. Agastya, Murali & Feng, Xin & Lu, Jingfeng, 2023. "Auction design with shortlisting when value discovery is covert," Journal of Mathematical Economics, Elsevier, vol. 107(C).

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    More about this item

    Keywords

    Auctions; Advertising; Order statistics;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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