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  3. American Economic Journal: Microeconomics
  4. May 2016
  5. Entry Deterrence in Dynamic Second-Price Auctions

Entry Deterrence in Dynamic Second-Price Auctions

  • Xiaogang Che
  • Tilman Klumpp
American Economic Journal: Microeconomics
vol. 8, no. 2, May 2016
(pp. 168-201)
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Abstract

We examine a dynamic second-price auction with independent private values and sequential costly entry. We show that delayed revelation equilibria exist in which some buyers place coordinated low early bids. These buyers revise their bids to reflect their true valuations just prior to the end of the auction. Compared to the benchmark immediate revelation equilibrium, in which buyers bid their valuations immediately after entry, fewer high-value bidders enter on expectation in the delayed revelation equilibria. Delayed revelation of buyer values decreases social welfare, but is necessary for bidders to have a strict participation incentive. (JEL D44, D82, D83)

Citation

Che, Xiaogang, and Tilman Klumpp. 2016. "Entry Deterrence in Dynamic Second-Price Auctions." American Economic Journal: Microeconomics, 8 (2): 168-201. DOI: 10.1257/mic.20140137

Additional Materials

JEL Classification

  • D44 Auctions
  • D82 Asymmetric and Private Information; Mechanism Design
  • D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
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