Bid Costs and Endogenous Bid Caps

Abstract

We study contests where several privately informed agents bid for a price. All bidders bear a cost of bidding that is an increasing function of their bids, and, moreover, bids may be capped. We show that, regardless of the number of bidders, if agents have linear or concave cost functions then setting a bid cap is not profitable for a designer who wishes to maximize the average bid. On the other hand, if agents have convex cost functions (i.e. an increasing marginal cost) then affectively capping the bids is profitable for a designer facing a sufficiently large number of bidders.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 147 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.