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Auctions with Frictions: Recruitment, Entry, and Limited Commitment

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  • Stephan Lauermann
  • Asher Wolinsky

Abstract

Auction models are convenient abstractions of informal price formation processes that arise in markets for assets or services. These processes involve frictions such as bidder recruitment costs for sellers, participation costs for bidders, and limitations on sellers commitment abilities. This paper develops an auction model that captures such frictions. We derive several novel predictions; in particular, we find that outcomes are often inefficient, and the market sometimes unravels.

Suggested Citation

  • 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.
    • Handle: RePEc:bon:boncrc:crctr224_2024_519
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    References listed on IDEAS

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    1. Cremer, Jacques & Spiegel, Yossi & Zheng, Charles Zhoucheng, 2007. "Optimal search auctions," Journal of Economic Theory, Elsevier, vol. 134(1), pages 226-248, May.
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    4. Jeremy Bulow & Paul Klemperer, 2009. "Why Do Sellers (Usually) Prefer Auctions?," American Economic Review, American Economic Association, vol. 99(4), pages 1544-1575, September.
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    6. Milgrom, Paul R, 1979. "A Convergence Theorem for Competitive Bidding with Differential Information," Econometrica, Econometric Society, vol. 47(3), pages 679-688, May.
    7. Stephan Lauermann & Asher Wolinsky, 2017. "Bidder Solicitation, Adverse Selection, and the Failure of Competition," American Economic Review, American Economic Association, vol. 107(6), pages 1399-1429, June.
    8. Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, vol. 86(1), pages 180-194, March.
    9. Stephan Lauermann & Asher Wolinsky, 2016. "Search With Adverse Selection," Econometrica, Econometric Society, vol. 84, pages 243-315, January.
    10. Jeremy Bulow & Paul Klemperer, 2009. "Why Do Sellers (Usually) Prefer Auctions?," American Economic Review, American Economic Association, vol. 99(4), pages 1544-75, September.
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    More about this item

    Keywords

    Auctions;

    JEL classification:

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

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