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Optimal auctions with externalities and signaling

Author

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  • Jozsef Molnar

    (Department of Economics, Northwestern University)

  • Gabor Virag

    (Department of Economics, Princeton University)

Abstract

This paper asks how to design a revenue-maximizing auction in the presence of post-auction market competition and asymmetric information. In this situation, bidders, depending on the auction mechanism, can signal their type through their bidding behavior which influences the outcome of the post-auction market game. Thus the auctioneer has to design a mechanism that not only specifies who wins the good but also describes the amount of information that can be revealed about the winer through signaling. This paper shows that to reveal all information about the winner can be optimal under some conditions.

Suggested Citation

  • Jozsef Molnar & Gabor Virag, 2001. "Optimal auctions with externalities and signaling," CERS-IE WORKING PAPERS 0112, Institute of Economics, Centre for Economic and Regional Studies.
    • Handle: RePEc:has:discpr:0112
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    References listed on IDEAS

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    1. Jozsef Molnar, 2002. "Preemptive Horizontal Mergers: Theory and Evidence," CERS-IE WORKING PAPERS 0213, Institute of Economics, Centre for Economic and Regional Studies.
    2. Jehiel, Philippe & Moldovanu, Benny, 2001. "Efficient Design with Interdependent Valuations," Econometrica, Econometric Society, vol. 69(5), pages 1237-1259, September.
    3. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
    4. In-Koo Cho & David M. Kreps, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(2), pages 179-221.
    5. Alessandro Lizzeri, 1999. "Information Revelation and Certification Intermediaries," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 214-231, Summer.
    6. Jacob K. Goeree, 2000. "Bidding for the Future," Virginia Economics Online Papers 346, University of Virginia, Department of Economics.
    7. Maskin, Eric S & Riley, John G, 1984. "Optimal Auctions with Risk Averse Buyers," Econometrica, Econometric Society, vol. 52(6), pages 1473-1518, November.
    8. Heidrun C. Hoppe & Philippe Jehiel & Benny Moldovanu, 2006. "License Auctions and Market Structure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(2), pages 371-396, June.
    9. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Multiproduct Firms, Product Differentiation, and Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
    10. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    11. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
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    1. repec:zbw:bofrdp:2007_017 is not listed on IDEAS
    2. Jozsef Molnar, 2002. "Preemptive Horizontal Mergers: Theory and Evidence," CERS-IE WORKING PAPERS 0213, Institute of Economics, Centre for Economic and Regional Studies.

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