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Optimal Advertising of Auctions

Optimal Advertising of Auctions
Author:

Nora Szech

links:
Source:

Journal of Economic Theory, 2011, Vol. 146, Issue 6, 2596-2607 DOI:10.1016/j.jet.2011.10.010

Date: 2011
Journal of Economic Theory, 2011, Vol. 146, Issue 6

We study a symmetric independent private values auction model where the revenue-maximizing seller faces a cost cn of attracting n bidders to the auction. If the distribution of valuations possesses an increasing failure rate (IFR), the seller overinvests in attracting bidders compared to the social optimum. Conversely, if the distribution is DFR, the seller underinvests compared to the social optimum. If the distribution of valuations becomes more dispersed, both, a revenue- and a welfare-maximizing seller, attract more bidders.