Quantifying the cost of excess market thickness in timber sale auctions
AbstractIn auctions with endogenous entry, theory predicts that too many potential bidders, or the excess market thickness, may actually decrease the seller's expected revenue and the social welfare generated by the auction. This paper proposes a computationally easy method for estimating the optimal number of potential bidders in timber sale auctions with endogenous entry and an uncertain number of active bidders and then quantifies the cost of excess market thickness. It is found that the welfare loss due to the excess market thickness is moderate in this market.
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Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Industrial Organization.
Volume (Year): 27 (2009)
Issue (Month): 5 (September)
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Web page: http://www.elsevier.com/locate/inca/505551
Timber auctions Excess market thickness Entry;
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