Selling to Advised Buyers
Name
aer.20170334.pdf
Description
Published version
Size
654.22 KB
Format
Adobe PDF
Checksum (MD5)
0254fd527879a38787ed76896639d278
Author(s)
Malenko, Andrey
Tsoy, Anton
Date Issued
2019
Journal
American Economic Review
Publisher
American Economic Association
Version
Final published version
Abstract
© 2019 American Economic Association. All Rights Reserved. In many cases, buyers are not informed about their valuations and rely on experts, who are informed but biased for overbidding. We study auction design when selling to such "advised buyers." We show that a canonical dynamic auction, the English auction, has a natural equilibrium that outperforms standard static auctions in expected revenues and allocative efficiency. The ability to communicate as the auction proceeds allows for more informative communication and gives advisors the ability to persuade buyers into overbidding. The same outcome is the unique equilibrium of the English auction when bidders can commit to contracts with their advisors.
MIT Department
Sloan School of Management
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1257/AER.20170334
