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ALL‐PAY AUCTIONS WITH A BUY‐PRICE OPTION
Author(s) -
Xu Minbo,
Li Sanxi,
Yan Jianye
Publication year - 2019
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12585
Subject(s) - common value auction , economics , bidding , microeconomics , reservation price , profit (economics) , mid price , limit price , forward auction , ask price , dutch auction , revenue equivalence , auction theory , price level , monetary economics , finance
This paper studies all‐pay auctions in which there is a buy‐price option for bidders to guarantee purchases at a seller‐specified price. We analyze symmetric increasing bidding equilibria in the first‐ and second‐price all‐pay auctions with the buy‐price option. While the optimal buy‐price in the second price is higher than are those in the first‐price all‐pay auction, both formats maintain the same expected profit. With an endogenous entry process, all‐pay auctions with the buy‐price can attract more consumers and ultimately reach a higher expected profit than does the uniform posted‐price selling mechanism. ( JEL D44, L11, L81)