Who pays when auction rules are bent?

Journal Article (Journal Article)

In many negotiations, rules are soft in the sense that the seller and/or buyers may break them at some cost. When buyers have private values, we show that the cost of such opportunistic behavior (whether by the buyers or the seller) is borne entirely by the seller in equilibrium, in the form of lower revenues. Consequently, the seller is willing to pay an auctioneer to credibly commit to a mechanism in which no one has the ability or the incentive to break the rules. Examples of "costly rule bending" considered here include hiring shill bidders and trying to learn others' bids before making one's own. © 2006 Elsevier B.V. All rights reserved.

Full Text

Duke Authors

Cited Authors

  • McAdams, D; Schwarz, M

Published Date

  • October 1, 2007

Published In

Volume / Issue

  • 25 / 5

Start / End Page

  • 1144 - 1157

International Standard Serial Number (ISSN)

  • 0167-7187

Digital Object Identifier (DOI)

  • 10.1016/j.ijindorg.2006.09.004

Citation Source

  • Scopus