Bidding among Friends and Enemies with Symmetric Information

We consider an auction setting, in a symmetric information framework, in which bidders, even if they fail to obtain the good, care about the price paid by the winner. We prove that the outcome of the first- price auction is not aff ected by identity independent price externalities while the outcome of the second-price auction is. In contrast, identity dependent price externalities a ect the outcome of both auction formats. In any case, the second-price auction exacerbates the eff ects of price externalities.