Asher Wolinsky, Northwestern University

Department seminar. Asher Wolinsky is a Professor at Northwestern University. He will present a paper entitled "Auctions with bidder recruitment"

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Asher Wolinsky

Abstract

Assets and contracts are often traded by a sort of auction or similar procedure. An important element is such is the recruitment of bidders. This is costly for the seller and for the bidders. This paper focuses on this aspect and examines issues concerning costly recruiting of bidders to an auction.

The model features a seller who can affect at a cost the Poisson distribution of the number of bidders. We consider both the case in which bidders who choose to paticipate incur participation/information acquisition costs and the case in which they do not. Among the issues discussed are the following.

Tension between seller's desire to induce aggressive bidding and induce participation. In particular, we show that for a certain range of recruitment costs, an auction in which bidders do not observe the number of competitors might "collapse", even if bidders bear no cost of entry, while under the same conditions an auction in which the bidders observe the number of competitors may survive.

Inefficiency in the form of wasteful recruiting effort (even when the cost of contacting a bidder is small).

  • This arises in an IPV environment with costly bidders' participation/information acquisition.
  • It also arises in a CV environment due to bidders' "excessive" caution.

Seller's private information is injected into bidding and prices through the recruitment effort.

  • Seller types who are efficient recruiters exert a negative "externality" that may restrict trade.
  • In the extreme, this might lead to the complete unraveling of the market.

Host: Bård Harstad

Published Dec. 19, 2018 1:47 PM - Last modified May 16, 2019 8:42 AM