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Equilibria in Second-Price Auctions with Private Participation Costs

Author

Listed:
  • Xiaoyong Cao

    (Department of Economics, University of International Business andEconomics, Beijing, China)

  • Guofu Tan

    (Department of Economics, University of Southern California, Los Angeles)

  • Guoqiang Tian

    (Department of Economics, Texas AM University, College Station)

  • Okan Yilankaya

Abstract

We study equilibria in second-price auctions where bidders are independently and pri- vately informed about both their values and participation costs, and where the joint dis- tributions of these values and costs across bidders are not necessarily identical. We show that there always exists an equilibrium in this general setting with two dimensional types of ex ante heterogeneous bidders. When bidders are ex ante homogeneous, there is a unique symmetric equilibrium, but asymmetric equilibria may also exist. We provide conditions under which the equilibrium is unique (not only among symmetric ones). We find that the marginal density of participation costs and the concentration of values matter for the uniqueness. The presence of private information on participation costs tends to reduce multiplicity of participation equilibria, although multiplicity still persists.

Suggested Citation

  • Xiaoyong Cao & Guofu Tan & Guoqiang Tian & Okan Yilankaya, 2016. "Equilibria in Second-Price Auctions with Private Participation Costs," Working Papers 1604, Nazarbayev University, Department of Economics, revised Dec 2016.
    • Handle: RePEc:naz:wpaper:1604
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    References listed on IDEAS

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    14. Xiaoyong Cao & Guoqiang Tian, 2013. "Second‐Price Auctions with Different Participation Costs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(1), pages 184-205, March.
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    Cited by:

    1. Xin Feng & Jingfeng Lu & Yeneng Sun, 2020. "Ex Ante Efficient Mechanism With Private Entry Costs," Economic Inquiry, Western Economic Association International, vol. 58(3), pages 1531-1541, July.
    2. Hans Peter Grüner & Thomas Tröger, 2019. "Linear Voting Rules," Econometrica, Econometric Society, vol. 87(6), pages 2037-2077, November.
    3. Ginzburg, Boris, 2019. "A Simple Model of Competitive Testing," MPRA Paper 99463, University Library of Munich, Germany.
    4. Hanzhe Zhang, 2021. "Prices versus auctions in large markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 72(4), pages 1297-1337, November.
    5. Xiaoyong Cao & Shao-Chieh Hsueh & Guoqiang Tian & Wei Wang, 2024. "Participation constraints in first-price auctions," International Journal of Game Theory, Springer;Game Theory Society, vol. 53(2), pages 609-634, June.
    6. Todd Kaplan & Aner Sela, 2022. "Second-Price Auctions with Private Entry Costs," Games, MDPI, vol. 13(5), pages 1-14, September.

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    More about this item

    Keywords

    two-dimensional types; private participation costs; second-price auctions; existence and uniqueness of equilibrium;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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