TY - JOUR
T1 - Auctions with imperfect commitment when the reserve may signal the cost to re-auction
AU - Jun, Byoung Heon
AU - Wolfstetter, Elmar G.
N1 - Funding Information:
We would like to thank Cuihong Fan and two anonymous referees for their constructive comments and suggestions. Research support by the BK21plus program of the Economics Department at Korea University , funded by the Korean Government , and the Deutsche Forschungsgemeinschaft (DFG) , SFB Transregio 15 , “Governance and Efficiency of Economic Systems” is gratefully acknowledged.
Funding Information:
A case in point is the annual Christmas Art Auction of the Berlin Senate. There, the city government auctions the work of artists who were supported by a fellowship. In these auctions, the auctioneer occasionally initiated the breach of his rules with the words “Just once, I revoke the reserve.”.
PY - 2015/5
Y1 - 2015/5
N2 - If bidders are uncertain whether the auctioneer sticks to the announced reserve, they respond with strategic non-participation, speculating that the auctioneer may revoke the reserve. However, the reserve inadvertently signals the auctioneer's type, which drives multiplicity of equilibria. Eliminating belief systems that violate the "intuitive criterion" yields a unique equilibrium reserve price equal to the seller's consumption value. Paradoxically, even if bidders initially believe that the auctioneer is bound by his reserve almost with certainty, commitment has no value. Commitment is a shorthand for a high cost to re-auction, which may reflect a concern for reputation. Several variations of the model assess the robustness of our results.
AB - If bidders are uncertain whether the auctioneer sticks to the announced reserve, they respond with strategic non-participation, speculating that the auctioneer may revoke the reserve. However, the reserve inadvertently signals the auctioneer's type, which drives multiplicity of equilibria. Eliminating belief systems that violate the "intuitive criterion" yields a unique equilibrium reserve price equal to the seller's consumption value. Paradoxically, even if bidders initially believe that the auctioneer is bound by his reserve almost with certainty, commitment has no value. Commitment is a shorthand for a high cost to re-auction, which may reflect a concern for reputation. Several variations of the model assess the robustness of our results.
KW - Auctions
KW - Imperfect commitment
KW - Signaling
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U2 - 10.1016/j.ijindorg.2015.02.007
DO - 10.1016/j.ijindorg.2015.02.007
M3 - Article
AN - SCOPUS:84925628470
SN - 0167-7187
VL - 40
SP - 11
EP - 21
JO - International Journal of Industrial Organization
JF - International Journal of Industrial Organization
ER -