Bray Theory Workshop

We consider a model where potential bidders consider paying an entry cost to participate in an auction. The value of the object sold depends on an unknown state of the world, and the bidders have conditionally i.i.d. signals on the state. We consider mostly the case where entry decisions are taken after observing the signal. We compare first- and second-price auction formats and show that for many symmetric equilibria of the game, first-price auction results in higher expected revenue to the seller.