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Auctioning Horizontally Differentiated Items

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  • Sarah Parlane

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Abstract

This paper analyses strategic market allocation by two auc- tioneers holding substitutes. It characterizes both the cooperative and com- petitive outcomes. Under cooperation or competition with close substitutes, bidders are allocated according to the expected total surplus each generates. This market division is efficient if and only if the distribution of bidders? tastes is not skewed. If skewed, reserve prices distort participation towards the least preferred item. For greater degrees of product differentiation compe- tition leads to multiple equilibria. Finally, competition with close substitutes sellers leave participation rents to their weakest bidder. They do not in other cases, whether they compete or cooperate.

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Bibliographic Info

Article provided by Springer in its journal Review of Industrial Organization.

Volume (Year): 33 (2008)
Issue (Month): 2 (September)
Pages: 113-128

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Handle: RePEc:kap:revind:v:33:y:2008:i:2:p:113-128

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Web page: http://www.springerlink.com/link.asp?id=100336

Related research

Keywords: Competition; English auction; Horizontal product differentiation; Reserve price;

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References

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  1. Roberto Burguet, 2003. "The Condominium Problem; Auctions for Substitutes," Working Papers 63, Barcelona Graduate School of Economics.
  2. Michael Peters, 1995. "A Competitive Distribution of Auctions," Working Papers peters-95-03, University of Toronto, Department of Economics.
  3. Stole, Lars A, 1995. "Nonlinear Pricing and Oligopoly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(4), pages 529-62, Winter.
  4. Michael Peters & Sergei Severinov, 1995. "Competition Among Sellers who offer Auctions Instead of Prices," Working Papers peters-95-02, University of Toronto, Department of Economics.
  5. McAfee, R Preston, 1993. "Mechanism Design by Competing Sellers," Econometrica, Econometric Society, vol. 61(6), pages 1281-1312, November.
  6. Biais, Bruno & Martimort, David & Rochet, Jean-Charles, 1998. "Competing Mechanisms in a Commun Value Environment," IDEI Working Papers 75, Institut d'Économie Industrielle (IDEI), Toulouse.
  7. Burguet, Roberto & Sakovics, Jozsef, 1999. "Imperfect Competition in Auction Designs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(1), pages 231-47, February.
  8. Chen, Yongmin & Wang, Ruqu, 2004. "A model of competing selling mechanisms," Economics Letters, Elsevier, vol. 85(2), pages 151-155, November.
  9. Bulow, Jeremy & Roberts, John, 1989. "The Simple Economics of Optimal Auctions," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1060-90, October.
  10. Parlane, S., 1998. "Contracting with Capacity Constrained Suppliers," Papers 98/4, College Dublin, Department of Political Economy-.
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Cited by:
  1. Deltas, George & Jeitschko, Thomas D., 2007. "Auction hosting site pricing and market equilibrium with endogenous bidder and seller participation," International Journal of Industrial Organization, Elsevier, vol. 25(6), pages 1190-1212, December.

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