Endogenous Competition Alters the Structure of Optimal Auctions

Potential bidders respond to a seller's choice of auction mechanism for a common-value or affiliated-values asset by endogenous decisions whether to incur an information-acquisition cost (and observe a private estimate), or forgo competing. Privately informed participants decide whether to incur a bid-preparation cost and pay an entry fee, or cease competing. Auction rules and information flows are quite general; participation decisions may be simultaneous or sequential. The resulting revenue identity for any auction mechanism implies that optimal auctions are allocatively efficient; a nontrivial reserve price is revenue-inferior. Optimal auctions are otherwise contentless: any auction that sells without reserve becomes optimal by adjusting any one of the continuous, spanning parameters, e.g., the entry fee. Seller's surplus-extracting tools are now substitutes, not complements. Many econometric studies of auction markets are seen to be flawed in their identification of the number of bidders

Coronavirus Gene 7 Counteracts Host Defenses and Modulates Virus Virulence

Transmissible gastroenteritis virus (TGEV) genome contains three accessory genes: 3a, 3b and 7. Gene 7 is only present in members of coronavirus genus a1, and encodes a hydrophobic protein of 78 aa. To study gene 7 function, a recombinant TGEV virus lacking gene 7 was engineered (rTGEV-Δ7). Both the mutant and the parental (rTGEV-wt) viruses showed the same growth and viral RNA accumulation kinetics in tissue cultures. Nevertheless, cells infected with rTGEV-Δ7 virus showed an increased cytopathic effect caused by an enhanced apoptosis mediated by caspase activation. Macromolecular synthesis analysis showed that rTGEV-Δ7 virus infection led to host translational shut-off and increased cellular RNA degradation compared with rTGEV-wt infection. An increase of eukaryotic translation initiation factor 2 (eIF2α) phosphorylation and an enhanced nuclease, most likely RNase L, activity were observed in rTGEV-Δ7 virus infected cells. These results suggested that the removal of gene 7 promoted an intensified dsRNA-activated host antiviral response. In protein 7 a conserved sequence motif that potentially mediates binding to protein phosphatase 1 catalytic subunit (PP1c), a key regulator of the cell antiviral defenses, was identified. We postulated that TGEV protein 7 may counteract host antiviral response by its association with PP1c. In fact, pull-down assays demonstrated the interaction between TGEV protein 7, but not a protein 7 mutant lacking PP1c binding motif, with PP1. Moreover, the interaction between protein 7 and PP1 was required, during the infection, for eIF2α dephosphorylation and inhibition of cell RNA degradation. Inoculation of newborn piglets with rTGEV-Δ7 and rTGEV-wt viruses showed that rTGEV-Δ7 virus presented accelerated growth kinetics and pathology compared with the parental virus. Overall, the results indicated that gene 7 counteracted host cell defenses, and modified TGEV persistence increasing TGEV survival. Therefore, the acquisition of gene 7 by the TGEV genome most likely has provided a selective advantage to the virus

An "Alternating Recognition" Model of English Auctions

We present an alternative abstraction of an English (oral ascending) auction to the standard, in Milgrom and Weber (1982), that accords more closely with practices in some auction markets. In particular, the assumptions that exits are irrevocable and necessarily public are dropped, making endogenous the decision to compete silently and privately, or openly. In the model, the price rises in a stylization of an auctioneer alternately recognizing two bidders who affirm willingness to pay the current price. The auctioneer pays attention to other bidders only when a recognized bidder exits. Such exits may be temporary, although we construct an equilibrium in which there is no benefit to exit and reentry. The number of public exits is stochastic; frequently a losing "bidder" will remain silent, giving no indication of his willingness to pay, and hence yielding no useful inference about his private information. Thus, the source of the expected revenue advantage of English auctions over second-price auctions is only stochastically available. Moreover, when public exits are incomplete, the ordinal rank of the bidder whose private information can be inferred is unknown, making that information less valuable. Consequently, the simpler formula for expected revenue in second-price auctions may be the preferred approximation for English auctions.Competitive Bidding, Oral Auctions, Auction Theory, Information Disclosure in Auctions

The Impact of Discrete Bidding and Bidder Aggressiveness on Sellers' Strategies in Open English Auctions: Reserves and Covert Shilling

In practice, the rules in most open English auctions require participants to raise bids by a sizeable, discrete amount. Furthermore, some bidders are typically more aggressive in seeking to become the “current bidder” during competitive bidding. Most auction theory, however, has assumed bidders can place any tiny “continuous” bid increase, and recommend as optimal the tiniest possible increase. This article examines how incorporating discrete bidding and bidder aggressiveness affect optimal strategies for an important decision for auction sellers, which is setting the lowest acceptable bid at which to sell the property. We investigate two alternative methods sellers often use to enforce this decision. These are setting an irrevocable before the auction, and , where the seller or confederates pose as bona fide bidders and raise bona fide bids, unsuspected by bidders. These optimal strategies interest auction participants, especially sellers who must recognize the bidding rules and bidder aggressiveness they will encounter in actual auctions. We also examine how these strategies change with the auction context, such as the number of bidders, and how they differ from corresponding strategies already identified for continuous bidding. Our model examines open English auctions where bidders have independent, private valuations. We find that discrete bidding does affect these strategies, as does the aggressiveness of the bidder with the highest valuation, to the average aggressiveness of all other remaining bidders. We identify the seller's optimal discrete reserve, and show that if the highest valuator is relatively more (less) aggressive, this increases (decreases) from the optimal continuous reserve, and also increases (decreases) as the number of bidders increases. With continuous bidding, by contrast, this reserve is invariant to the number of bidders. As this bidder becomes relatively more aggressive, for a given number of bidders, the optimal discrete reserve increases, while as he or she becomes less aggressive, the seller's expected auction utility increases, which increases the set of auctions where discrete bidding generates higher seller welfare than continuous. We propose a covert shilling model that requires shilling sellers, and any confederates and auctioneers, to outwardly act no differently than with reserves, to avoid detection. We identify cases where the seller optimally shills once the bona fide bidding has stopped, and identify the corresponding optimal point to stop shilling and accept the next bona fide bid, if offered. This stopping point does not depend on where bona fide bidding stops, or aggressiveness, or the number of bidders, or on whether shill bids alternate with bona fide bids or are consecutively entered. We also find that the optimal lowest acceptable bid with shilling can be higher (lower) than that with reserves if the highest valuator is sufficiently unaggressive (aggressive). By comparison, in continuous bidding shilling and reserves yield identical lowest acceptable bids. Sometimes the seller using a shilling strategy optimally should not shill at all, and instead accept the bid where bona fide bidding stops. This can occur when that bid, or the number of bidders, is sufficiently high, or when the highest valuator is as, or less, aggressive than other bidders. Optimal shilling can be as practical to implement as reserves, because it does not require sellers to have any information beyond that needed in a reserve auction. If sellers shill optimally, they can never be worse off compared to using a reserve, and can be better off. Shilling can make bidders worse off, but can also make them better off when the seller using a shilling strategy optimally accepts bids below the optimal reserve. In these latter cases, shilling Pareto dominates reserves, ex ante. We provide numerical examples to illustrate these results. We discuss how our results might be affected if shilling is not covert, or bidders' valuations have a common value component rather than being independent, or by the rules used in many discrete bid Internet auctions.Auctions, Internet Auctions, Discrete Bidding, Pricing, Bidder Behavior