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An economic perspective on auctions

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  • Philippe Jehiel
  • Benny Moldovanu

Abstract

The recent spectrum auctions in Europe have shown that serious problems can arise in auctions where multiple complementary objects are being sold (such as blocks of radio spectrum) that will subsequently be used by the winning bidders to compete against each other in downstream markets. Other important instances of such situations include take-off and landing slots at airports and rights for electricity and gas transmission. We first review some of the theory describing multi-object auctions. We next outline the importance of strategic effects arising in auctions that are followed by competition between the bidders, and the tension arising between various goals such as efficiency and revenue maximization. Although more flexible auction formats can have virtues (particularly in taking into account complementarities), they can also be manipulated by bidders to build market power to the detriment of consumers. We next apply these insights to the recent European UMTS licence auctions. Finally we draw the main conclusions and policy implications. Copyright (c) CEPR, CES, MSH, 2003..

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Bibliographic Info

Article provided by CEPR & CES & MSH in its journal Economic Policy.

Volume (Year): 18 (2003)
Issue (Month): 36 (04)
Pages: 269-308

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Handle: RePEc:bla:ecpoli:v:18:y:2003:i:36:p:269-308

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Cited by:
  1. Maarten Janssen & Vladimir Karamychev, 2013. "Gaming in Combinatorial Clock Auctions," Tinbergen Institute Discussion Papers 13-027/VII, Tinbergen Institute, revised 16 Dec 2013.
  2. Peter Cramton & Evan Kwerel & Gregory Rosston & Andrzej Skrzypacz, 2012. "Using Spectrum Auctions to Enhance Competition in Wireless Services," Papers of Peter Cramton 11ckrs, University of Maryland, Department of Economics - Peter Cramton, revised 2012.
  3. Maarten C.W. Janssen & Vladimir A. Karamychev, 2010. "Do auctions select efficient firms?," Economic Journal, Royal Economic Society, vol. 120(549), pages 1319-1344, December.
  4. Niklas Potrafke, 2010. "Does government ideology influence deregulation of product markets? Empirical evidence from OECD countries," Public Choice, Springer, vol. 143(1), pages 135-155, April.
  5. Yoon, Kiho, 2006. "Bid preference in license auctions: Affirmative action can achieve economic efficiency," International Journal of Industrial Organization, Elsevier, vol. 24(3), pages 593-604, May.
  6. Sherstyuk, Katerina & Dulatre, Jeremy, 2008. "Market performance and collusion in sequential and simultaneous multi-object auctions: Evidence from an ascending auctions experiment," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 557-572, March.
  7. Maarten C.W. Janssen & Vladimir A. Karamychev, 2007. "Do Auctions select Efficient Firms?," Tinbergen Institute Discussion Papers 07-001/1, Tinbergen Institute.
  8. Jehiel, Philippe & Moldovanu, Benny, 2006. "Allocative and Informational Externalities in Auctions and Related Mechanisms," CEPR Discussion Papers 5558, C.E.P.R. Discussion Papers.
  9. Maarten Janssen & Vladimir Karamychev, 2013. "Gaming in Combinatorial Clock Auctions," Tinbergen Institute Discussion Papers 13-027/VII, Tinbergen Institute, revised 16 Dec 2013.
  10. Peter Cramton & Andrzej Skrzypacz & Robert Wilson, 2007. "Revenues in the 700 MHz Spectrum Auction," Papers of Peter Cramton 07rev700, University of Maryland, Department of Economics - Peter Cramton, revised 2007.
  11. Goeree, Jacob K. & Offerman, Theo & Schram, Arthur, 2006. "Using first-price auctions to sell heterogeneous licenses," International Journal of Industrial Organization, Elsevier, vol. 24(3), pages 555-581, May.
  12. Markus Groth, 2009. "The transferability and performance of payment-by-results biodiversity conservation procurement auctions: empirical evidence from northernmost Germany," Working Paper Series in Economics 119, University of L√ľneburg, Institute of Economics.
  13. Gary Madden & Erik Bohlin & Thien Tran & Aaron Morey, 2014. "Spectrum Licensing, Policy Instruments and Market Entry," Review of Industrial Organization, Springer, vol. 44(3), pages 277-298, May.

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