Work

Auctions with Frictions: Recruitment, Entry, and Limited Commitment

Year: 2025

Type: article

Abstract: Auction models are convenient abstractions of informal price-formation processes that arise in markets for assets or services. These processes involve frictions like bidder recruitment costs for sellers, participation costs for bidders, and limitations on sellers’ commitment abilities. This paper develops an auction model that captures such frictions. We derive novel insights, notably that outcomes are often inefficient, that markets sometimes unravel, and that the observability of competition may have a large effect.

Source: The Review of Economic Studies

DOI: 10.1093/restud/rdaf052

Authors: Stephan Lauermann, Asher Wolinsky

Institutions: University of Bonn, Northwestern University, Northwestern University

Language: English

Topic: Auction Theory and Applications

Subfield: Management Science and Operations Research

Field: Decision Sciences

Domain: Social Sciences

Open Access status: green

Funder: Deutsche Forschungsgemeinschaft

Awards: G3023023833, G5060839972