IDEAS home Printed from https://ideas.repec.org/a/spr/joecth/v77y2024i4d10.1007_s00199-023-01518-9.html
   My bibliography  Save this article

Signaling through entry in auctions with sequential and costly participation

Author

Listed:
  • Jeongwoo Lee

    (Korea Insurance Research Institute)

  • Jaeok Park

    (Yonsei University)

Abstract

This paper analyzes a scenario in which two bidders compete for two objects sold at two second-price auctions. Each bidder’s valuations of the two objects are affiliated, and participating in each auction is costly. Bidders make their participation decisions for the two auctions sequentially, in that they decide whether to enter the second auction after observing their entry decisions for the first auction. After making their participation decisions for the two auctions, bidders choose their bids in any auction they participate in. We derive the properties of equilibria and provide a sufficient condition for their existence. Due to affiliation and the presence of participation costs, a bidder’s entry into the first auction signals his strong interest in the object sold at the second auction. Hence, a bidder with a higher valuation of the second object is more likely to participate in the first auction in order to deter his opponent from entering the second auction. We then compare the models of sequential and simultaneous participation decisions in terms of equilibrium cutoffs and the equilibrium probability of entry into the two auctions. Lastly, we discuss the effects of the order of entry decisions on the revenues in the two auctions as well as the total revenue.

Suggested Citation

  • Jeongwoo Lee & Jaeok Park, 2024. "Signaling through entry in auctions with sequential and costly participation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 77(4), pages 1085-1126, June.
    • Handle: RePEc:spr:joecth:v:77:y:2024:i:4:d:10.1007_s00199-023-01518-9
    DOI: 10.1007/s00199-023-01518-9
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00199-023-01518-9
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s00199-023-01518-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Entry deterrence; Participation costs; Preemptive entry; Sequential auctions; Signaling;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:joecth:v:77:y:2024:i:4:d:10.1007_s00199-023-01518-9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.