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Equal Priority Auctions

Microeconomics Seminar 2020-2021
joint with the Département de sciences économiques, Université de Montréal

Organizer : Sean Horan (U. of Montreal)

*  Invitation only. Please contact the organizer if you would like access.


RÉSUMÉ : Using a well-known environment where buyers have identically and independently distributed private valuations for an object, we consider a game of imperfect information in which some buyers may not be informed of the commitments made by the seller of the object. Informed buyers can pretend to be uninformed but not vice versa. We provide a class of valuation distributions for which the most profitable symmetric equilibrium for the seller uses a mechanism we refer to as an equal priority auction. Equal priority means that with positive probability informed and uninformed buyers are equally likely to receive offers at a fixed price. This is despite the fact that in such a case, these offers will be accepted for sure by the informed and possibly rejected by the uninformed. Computations show that trade is conducted at a fixed price with high probability for moderate values of the probability that buyers are not informed. 

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