Entry fees and bidder behavior in sealed – bid auctions

Author(s):	Keywords:
Kanita Ćurevac (DE)	auctions, bidder participation, entry costs

Abstract:
Auctions are vital in economic transactions, from private sales to government procurement. A key aspect is bidders’ participation decisions, especially when entry incurs costs. This paper compares two models: Levin and Smith (1994), where bidders pay entry fees before learning valuations—concluding fees are never optimal—and Menezes and Monteiro (2000), where bidders first learn valuations, showing fees can screen low-value participants and increase revenue. The paper explores theoretical foundations, equilibrium strategies, and revenue implications, offering insights into endogenous entry, revenue equivalence, and bidder behavior in sealed-bid auctions. This research enhances auction design understanding in settings with costly participation.

Abstract:

Auctions are vital in economic transactions, from private sales to government procurement. A key aspect is bidders’ participation decisions, especially when entry incurs costs. This paper compares two models: Levin and Smith (1994), where bidders pay entry fees before learning valuations—concluding fees are never optimal—and Menezes and Monteiro (2000), where bidders first learn valuations, showing fees can screen low-value participants and increase revenue. The paper explores theoretical foundations, equilibrium strategies, and revenue implications, offering insights into endogenous entry, revenue equivalence, and bidder behavior in sealed-bid auctions. This research enhances auction design understanding in settings with costly participation.

Cite as:
Kanita Ćurevac (2025) Entry fees and bidder behavior in sealed – bid auctions. Quality 2025 (S. Jašarević, editor), ISSN 1512-9268, Neum, B&H, 3-5 June 2025., pp. 205-210

031-Q25-035

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