On the incidence of commissions in auction markets
AbstractWe analyze the welfare consequences of an increase in the commissions charged by intermediaries in auction markets. Commissions are similar to taxes imposed on buyers and sellers, and standard economics suggests that both sellers and buyers are made worse off by the tax. However, we show that when the buyers' participation constraint binds and when sellers set optimal reservation prices, the level of commissions correlates to participation and reservation prices in such a way that participating buyers strictly gain from higher commissions.
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Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Industrial Organization.
Volume (Year): 28 (2010)
Issue (Month): 6 (November)
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Web page: http://www.elsevier.com/locate/inca/505551
Auction Intermediation Commissions Welfare;
Other versions of this item:
- GINSBURGH, Victor & LEGROS, Patrick & SAHUGUET, Nicolas, . "On the incidence of commissions in auction markets," CORE Discussion Papers RP -2253, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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