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The B.E. Journal of Theoretical Economics

Editor-in-Chief: Schipper, Burkhard

Ed. by Fong, Yuk-fai / Peeters, Ronald / Puzzello , Daniela / Rivas, Javier / Wenzelburger, Jan

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1935-1704
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Price Reveal Auctions

Andrea Gallice
  • Corresponding author
  • ESOMAS Department, University of Turin, Torino, Italy
  • Collegio Carlo Alberto, Via Real Collegio 30 Moncalieri, Italy
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Published Online: 2016-01-12 | DOI: https://doi.org/10.1515/bejte-2014-0099

Abstract

A price reveal auction (PRA) is a descending price auction in which the current price of the item on sale is hidden. Buyers can privately observe the price only by paying a fee, and every time an agent does so, the price falls by a predetermined amount. We show that if the number of participants, n, is common knowledge, then in equilibrium a PRA replicates the outcome of a posted price mechanism. In particular, at most one buyer observes the price and the auction immediately finishes. In contrast, multiple entries can occur and profitability is enhanced when agents are uncertain about n. Under some conditions, a PRA may even yield higher expected revenues than standard auction formats.

Keywords: price reveal auctions; pay-per-bid auctions; endogenous price decrease

JEL: D44; C72

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About the article

Published Online: 2016-01-12

Published in Print: 2016-06-01


Citation Information: The B.E. Journal of Theoretical Economics, ISSN (Online) 1935-1704, ISSN (Print) 2194-6124, DOI: https://doi.org/10.1515/bejte-2014-0099.

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