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Endogenous entry to security-bid auctions
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Sogo, Takeharu, Bernhardt, Dan and Liu, Tingjun (2016) Endogenous entry to security-bid auctions. The American Economic Review, 106 (11). pp. 3577-3589. doi:10.1257/aer.20151538
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Official URL: http://doi.org/10.1257/aer.20151538
Abstract
We endogenize entry to a security-bid auction, where participation is costly and bidders must decide given their private valuations whether to participate. We first consider any minimum reserve security-bid of a fixed expected value that weakly exceeds the asset's value when retained by the seller. DeMarzo, Kremer, and Skrzypacz (2005) establish that with a fixed number of bidders, auctions with steeper securities yield the seller more revenues. Counterintuitively, we find that auctions with steeper securities also attract more entry, further enhancing the revenues from such auctions. We then establish that with optimal reserve securities, auctions with steeper securities always yield higher expected revenues.
| Item Type: | Journal Article | ||||||||
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| Divisions: | Faculty of Social Sciences > Economics | ||||||||
| Journal or Publication Title: | The American Economic Review | ||||||||
| Publisher: | American Economic Association | ||||||||
| ISSN: | 0002-8282 | ||||||||
| Official Date: | 2016 | ||||||||
| Dates: |
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| Volume: | 106 | ||||||||
| Number: | 11 | ||||||||
| Page Range: | pp. 3577-3589 | ||||||||
| DOI: | 10.1257/aer.20151538 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Restricted or Subscription Access |
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