Frictions in Internet Auctions with Many Traders: A Counterexample

8 Pages Posted: 2 Oct 2015 Last revised: 2 Jun 2019

See all articles by Javier D. Donna

Javier D. Donna

University of Florida

Pablo Schenone

Arizona State University (ASU)

Greg Veramendi

Arizona State University (ASU) - Economics Department

Date Written: September 1, 2015

Abstract

Peters and Severinov (2006) (PS henceforth) characterize a perfect Bayesian equilibrium (PBE) in a competing auctions environment, where all buyers are linked to all the sellers. PS characterize a PBE using a simple bidding rule, whereby buyers select in which auction to bid. In this note we show that when buyers are linked with a subset of the sellers (i.e. when there are search frictions), the PS bidding rule is no longer guaranteed to be efficient nor a PBE of the competing auctions game of PS. Our results indicate that researchers should be cautious when using the PS bidding rule to make inference about the behavior of buyers and sellers in a market where frictions are present such as eBay.

Keywords: Auctions; Internet; Frictions; Networks

JEL Classification: C73; C78; D44

Suggested Citation

Donna, Javier D. and Schenone, Pablo and Veramendi, Greg, Frictions in Internet Auctions with Many Traders: A Counterexample (September 1, 2015). Economics Letters, Vol. 138, No. 1, 2016, Available at SSRN: https://ssrn.com/abstract=2667659 or http://dx.doi.org/10.2139/ssrn.2667659

Javier D. Donna (Contact Author)

University of Florida ( email )

Gainesville, FL 32606
United States

HOME PAGE: http://www.jdonna.org/

Pablo Schenone

Arizona State University (ASU) ( email )

Farmer Building 440G PO Box 872011
Tempe, AZ 85287
United States

Greg Veramendi

Arizona State University (ASU) - Economics Department ( email )

Tempe, AZ 85287-3806
United States

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