The Scope of Auctions in the Presence of Downstream Interactions and Information Externalities (original) (raw)

Auctions with toeholds: An experimental study of company takeovers

2011

We run experiments on English Auctions where the bidders already own a part (toehold) of the good for sale. The theory predicts a very strong (“explosive”) effect of even small toeholds. While asymmetric toeholds do have an effect on bids and revenues in the lab, which gets stronger the larger the asymmetry, it is not nearly as strong as predicted. We explain this by analyzing the flatness of the payoff functions, which leads to large deviations from the equilibrium strategies being relatively costless.

ffi cient and Optimal Selling Mechanisms with Private Information Acquisition Costs ∗

2010

In auctions with private information acquisition costs, we completely characterize efficient and optimal two-stage selling mechanisms, with the first stage being the pre-screening or entry right allocation mechanism, and the second stage being the traditional private good provision mechanism. Both efficiency and optimality require the second stage mechanism to be ex post efficient. For the first stage of entry allocation, both efficient and optimal mechanisms admit the most efficient bidders (the bidders with the least information acquisition costs), while the optimal mechanism admits fewer entrants. The efficient entry right allocation rule maximizes the expected total surplus, while the optimal entry right allocation rule maximizes the expected “virtual” total surplus, which is the total surplus adjusted for the information rent. We show that both efficient and optimal entry right allocation rules can be truthfully implemented in dominant strategies. We also demonstrate that the o...

Optimal Two-stage Auctions with Costly Information Acquisition ¤

2013

We consider a two-stage auction environment with costly entry wherein the cost mainly stems from information acquisition. Bidders are endowed with original estimates (“types”) about their private values, and can further learn their true values of the object for sale by incurring an entry cost. We show that optimality of the generalized Myerson allocation rule is robust to this sequential screening setting with costly entry. Optimal entry is thus to admit the set of bidders that maximizes expected virtual surplus adjusted by both the second-stage signal and entry cost. We also show that the optimal mechanism can be implemented via a two-stage auction that is essentially a handicap auction augmented with an entry mechanism.