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Reputational Bidding

Author

Listed:
  • Francesco Giovannoni
  • Miltiadis Makris
Abstract
We consider auctions where bidders care about the reputational effects of their bidding and argue that the amount of information disclosed at the end of the auction will influence bidding. We focus on bid disclosure rules that capture all of the realistic cases. We show that bidders distort their bidding in a way that conforms to stylized facts about takeovers/licence auctions. We rank the disclosure rules in terms of their expected revenues and find that, under certain conditions, full disclosure will not be optimal. First‐price and second‐price auctions with price disclosure are not revenue equivalent and we rank them.

Suggested Citation

  • Francesco Giovannoni & Miltiadis Makris, 2014. "Reputational Bidding," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(3), pages 693-710, August.
    • Handle: RePEc:wly:iecrev:v:55:y:2014:i:3:p:693-710
    DOI: 10.1111/iere.12067
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    References listed on IDEAS

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    1. Dan Maldoom, 2005. "A Comment on 'Strange Bids: Bidding Behaviour in the United Kingdom's Third Generation Spectrum Auction' by Tilman Borgers and Christian Dustmann," Economic Journal, Royal Economic Society, vol. 115(505), pages 579-582, July.
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    8. Haile, Philip A., 2003. "Auctions with private uncertainty and resale opportunities," Journal of Economic Theory, Elsevier, vol. 108(1), pages 72-110, January.
    9. Tilman Börgers & Christian Dustmann, 2005. "Strange Bids: Bidding Behaviour in the United Kingdom's Third Generation Spectrum Auction," Economic Journal, Royal Economic Society, vol. 115(505), pages 551-578, July.
    10. Matthew Rhodes‐Kropf & David T. Robinson, 2008. "The Market for Mergers and the Boundaries of the Firm," Journal of Finance, American Finance Association, vol. 63(3), pages 1169-1211, June.
    11. Yim, Soojin, 2013. "The acquisitiveness of youth: CEO age and acquisition behavior," Journal of Financial Economics, Elsevier, vol. 108(1), pages 250-273.
    12. Timothy Salmon & Bart Wilson, 2008. "Second chance offers versus sequential auctions: theory and behavior," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 34(1), pages 47-67, January.
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    Citations

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    Cited by:

    1. Bos, Olivier & Gomez-Martinez, Francisco & Onderstal, Sander & Truyts, Tom, 2021. "Signalling in auctions: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 187(C), pages 448-469.
    2. Olivier Bos & Tom Truyts, 2021. "Auctions with signaling concerns," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 30(2), pages 420-448, May.
    3. Olivier Bos & Tom Truyts, 2023. "Entry in first-price auctions with signaling," International Journal of Game Theory, Springer;Game Theory Society, vol. 52(2), pages 423-450, June.
    4. Rivera Mora, Ernesto, 2024. "Mechanism design with belief-dependent preferences," Journal of Economic Theory, Elsevier, vol. 216(C).
    5. Cho, Myeonghwan & Song, Joon, 2022. "Auctioning business licenses to engage in Cournot competition," Economics Letters, Elsevier, vol. 210(C).
    6. Jibang Wu & Ashwinkumar Badanidiyuru & Haifeng Xu, 2021. "Auctioning with Strategically Reticent Bidders," Papers 2109.04888, arXiv.org, revised Jan 2023.

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    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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