Abstract
A seller wants to allocate an indivisible product among a number of potential bidders by a finite deadline, and to contact a bidder, she needs to incur a search cost. We show that the seller's optimal search outcomes can be implemented by a sequential search auction, which is characterized by declining reserve prices and increasing search intensities (sample sizes) over time. These monotonicity results are robust in both cases of long-lived and short-lived bidders, yet a seller with short-lived bidders sets lower reserve prices and searches more intensively. We also show that the inefficiency of an optimal search auction can stem from its inefficient search rule.
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