Participation costs and efficient auctions

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57 Scopus citations


Suppose that risk neutral agents have independently (and perhaps asymmetrically) distributed private valuations for an indivisible object. A mechanism assigns the object, but it is costly to send messages to the coordinator. In these circumstances, the second-price auction has an equilibrium that is classically ex ante efficient, given general opportunities to invest in information about or enhancements of own valuations. In contrast, the first-price sealed bid auction may have no efficient equilibrium, even if buyers are symmetric. Other properties of the first-price auction are proved. A semirevelation principle is established for mechanisms with participation costs. Journal of Economic Literature Classification Numbers: D44, D82.

Original languageEnglish (US)
Pages (from-to)228-259
Number of pages32
JournalJournal of Economic Theory
Issue number1
StatePublished - Oct 1996

ASJC Scopus subject areas

  • Economics and Econometrics


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