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Auctions in Markets: Common Outside Options and the Continuation Value Effect

Auctions in Markets: Common Outside Options and the Continuation Value Effect Abstract In this paper, we study auctions with outside options provided by future market interaction focusing on the revenue effects of some information revelation policies. We show that auctions with less information revelation may yield higher revenues. In particular, we show that it is never optimal for the auctioneer to reveal information after the auction. Moreover, it is also not optimal to reveal information before the auction unless bidders already have precise information on their own. Our model provides a novel explanation for the prevalence of opaque trading mechanisms, and it offers insights into information sharing in dynamic models of trade. (JEL D44, D83 ) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Microeconomics American Economic Association

Auctions in Markets: Common Outside Options and the Continuation Value Effect

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Publisher
American Economic Association
Copyright
Copyright © 2012 by the American Economic Association
Subject
Articles
ISSN
1945-7685
eISSN
1945-7685
DOI
10.1257/mic.4.4.107
Publisher site
See Article on Publisher Site

Abstract

Abstract In this paper, we study auctions with outside options provided by future market interaction focusing on the revenue effects of some information revelation policies. We show that auctions with less information revelation may yield higher revenues. In particular, we show that it is never optimal for the auctioneer to reveal information after the auction. Moreover, it is also not optimal to reveal information before the auction unless bidders already have precise information on their own. Our model provides a novel explanation for the prevalence of opaque trading mechanisms, and it offers insights into information sharing in dynamic models of trade. (JEL D44, D83 )

Journal

American Economic Journal: MicroeconomicsAmerican Economic Association

Published: Nov 1, 2012

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