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Predatory Bidding in Sequential Auctions

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Author Info
Hikmet Gunay () (University of Manitoba)
Xin Meng () (University of Manitoba)

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Abstract

The Turkish government wanted to sell two GSM (cell-phone) licenses in 2000 with sequential auctions. The winning bid in the first auction would be the reserve price for the second auction. This auction design gives incentives to ``predatory bidding." We show how a strategic firm will bid too high in the first auction hence, no other firms can pay the reserve price in the second auction. The winning firm will make up for the high-bid in terms of more profit due to less competition in the market. We show that the government could have sold the two licenses and raised more revenue in a correctly designed sequential auction.

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File URL: http://www.accessecon.com/pubs/EB/2007/Volume4/EB-07D00003A.pdf
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Publisher Info
Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 4 (2007)
Issue (Month): 12 ()
Pages: 1-5
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ebl:ecbull:v:4:y:2007:i:12:p:1-5

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Find related papers by JEL classification:
D0 - Microeconomics - - General
D4 - Microeconomics - - Market Structure and Pricing

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This page was last updated on 2010-1-6.

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