Efficient Auctions with Private Participation Costs∗

suggestions and comments. Previous versions have been presented at the 2005 Australian Conference of Economists and the NUS IO workshop. All errors are ours. Financial support from Faculty of Arts and Social Sciences at National University of Singapore (R-122-000-088-112) is gratefully acknowledged. Abstract This paper studies ex ante efficient auctions when potential bidders observe two private signals: his private value and his participation cost. First, we establish the existence of the ex ante efficient allocation. Second, we establish that the second-price auction with a reserve price equal to the seller’s valuation and zero entry fee is ex ante efficient. Third, we show that any ex ante efficient auction must be ex post efficient. Fourth, in the symmetric setting, we present four formats of ex ante efficient auctions within the symmetric-entry class