Costly auction entry, royalty payments, and the optimality of asymmetric designs

• 成果类型: Article
• 署名作者: Bernhardt, Dan; Liu, Tingjun; Sogo, Takeharu
• 署名单位: University of Illinois System; University of Illinois Chicago; University of Illinois Chicago Hospital; University of Warwick; University of Hong Kong; SKEMA Business School; Universite Cote d'Azur
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2020.105041
• 发表日期: 2020
• 关键词: Auctions with participation costs; Royalty payments; Optimal auctions; asymmetric auctions; Heterogeneous bidders

摘要

We analyze optimal auction mechanisms when bidders base costly entry decisions on their valuations, and bidders pay with a fixed royalty rate plus cash. With sufficient valuation uncertainty relative to entry costs, the optimal mechanism features asymmetry so that bidders enter with strictly positive but different (ex-ante) probabilities. When bidders are ex-ante identical, higher royalty rates-which tie payments more closely to bidder valuations-increase the optimal degree of asymmetry in auction design, further raising revenues. When bidders differ ex-ante in entry costs, the seller favors the low cost entrant; whereas when bidders have different valuation distributions, the seller favors the weaker bidder if entry costs are low, but not if they are high. Higher royalty rates cause the seller to favor the weaker bidder by less, and the strong bidder by more. (C) 2020 Elsevier Inc. All rights reserved.