BibTeX
@MISC{Lu04auctiondesign,
author = {Jingfeng Lu},
title = {Auction Design with Opportunity Cost },
year = {2004}
}
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Abstract
This paper considers the optimal auction design when potential bidders have the same known positive opportunity cost of bidding. I show that a modified Vickrey auction with a uniform reserve price and a uniform participation subsidy is the optimal symmetric-shutdown mechanism under the usual regularity conditions. When this mechanism is adopted, I find that the seller’s expected revenue decreases as the number of the potential bidders increases, if the bidders’ private values are heavily distributed near the highest value. Thus, in those cases the overall optimal auction mechanism must be discriminatory, in the sense of implementing asymmetric shutdown across bidders.
Keyphrases
auction design opportunity cost potential bidder increase bidder private value optimal auction design potential bidder positive opportunity cost uniform participation subsidy overall optimal auction mechanism optimal symmetric-shutdown mechanism uniform reserve price modified vickrey auction usual regularity condition
