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Competition among mechanism designers in a common value environment

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  • Michael Peters

    (Department of Economics, University of Toronto, 150 St. George Street, Toronto, Ontario, Canada M5S 3G7)

Abstract

A competitive economy is studied in which sellers offer alternative direct mechanisms to buyers who have private information about their own private use value for the commodity being traded. In addition the commodity has a common value to all buyers, perhaps represented by the future resale value of the commodity. A competitive equilibrium in mechanisms is described. In every such equilibrium it is shown that sellers must offer mechanisms that are allocationally equivalent to English ascending price auctions. The reservation prices that sellers set are shown to be below their ex post cost of trading the commodity.

Suggested Citation

  • Michael Peters, 1999. "Competition among mechanism designers in a common value environment," Review of Economic Design, Springer;Society for Economic Design, vol. 4(3), pages 273-292.
    • Handle: RePEc:spr:reecde:v:4:y:1999:i:3:p:273-292
    Note: Received: 24 April 1998 / Accepted: 8 March 1999
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    References listed on IDEAS

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    1. R. Preston McAfee & Daniel C. Quan & Daniel R. Vincent, 2002. "How to Set Minimum Acceptable Bids, with an Application to Real Estate Auctions," Journal of Industrial Economics, Wiley Blackwell, vol. 50(4), pages 391-416, December.
    2. Michael Peters, 1997. "A Competitive Distribution of Auctions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(1), pages 97-123.
    3. Bulow, Jeremy I. & Klemperer, Paul, 1994. "Auctions vs. Negotiations," CEPR Discussion Papers 924, C.E.P.R. Discussion Papers.
    4. McAfee, R Preston, 1993. "Mechanism Design by Competing Sellers," Econometrica, Econometric Society, vol. 61(6), pages 1281-1312, November.
    5. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
    6. Vincent Daniel R., 1995. "Bidding Off the Wall: Why Reserve Prices May Be Kept Secret," Journal of Economic Theory, Elsevier, vol. 65(2), pages 575-584, April.
    7. Michael Peters, 1995. "A Competitive Distribution of Auctions," Working Papers peters-95-03, University of Toronto, Department of Economics.
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    Citations

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    Cited by:

    1. Eeckhout, Jan & Kircher, Philipp, 2010. "Sorting versus screening: Search frictions and competing mechanisms," Journal of Economic Theory, Elsevier, vol. 145(4), pages 1354-1385, July.
    2. Ángel Hernando Veciana, 2001. "Competition Among Auctioneers," Working Papers. Serie AD 2001-18, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    3. Hernando-Veciana, Angel, 2005. "Competition among auctioneers in large markets," Journal of Economic Theory, Elsevier, vol. 121(1), pages 107-127, March.
    4. Randall Wright & Philipp Kircher & Benoit Julîen & Veronica Guerrieri, 2017. "Directed Search: A Guided Tour," NBER Working Papers 23884, National Bureau of Economic Research, Inc.
    5. Philipp Kircher & Jan Eeckhout, 2008. "Prices as Optimal Competitive Sales Mechanisms," 2008 Meeting Papers 504, Society for Economic Dynamics.
    6. Hila Etzion & Edieal Pinker & Abraham Seidmann, 2006. "Analyzing the Simultaneous Use of Auctions and Posted Prices for Online Selling," Manufacturing & Service Operations Management, INFORMS, vol. 8(1), pages 68-91, March.
    7. Subir Bose & George Deltas, 2007. "Exclusive Versus Non-exclusive Dealing in Auctions with Resale," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 31(1), pages 1-17, April.
    8. Klaus Kultti, 2003. "About Market Structure," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 240-251, January.

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    More about this item

    Keywords

    Common value auctions; competition; mechanism design;
    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

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