Auctions Versus Private Negotiations in Buyer-Seller Networks

Auctions Versus Private Negotiations in Buyer-Seller Networks

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Buyer-seller networks where price is determined by an ascending-bid auction are important in many economic examples such as certain real estate markets, radio spectrum sharing, and buyer-supplier networks.However, it may be that some sellers are better off not bushranger awning participating in the auction.We consider what happens if sellers can make a take it or leave it offer to one of their linked buyers before the auction takes place and thus such a seller can choose not to participate in the auction.We give conditions on the graph and buyers valuations under which the buyer and seller will both agree to such a take it or leave it offer.

Specifically, the buyer-seller pair will choose private negotiation over the auction if the seller acts as a network bridge napoleon concealer with power over the buyer and if there are enough buyers with low valuations so that the seller does not expect to receive a high price in the auction.