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Horizontal Product Differentiation in Auctions and Multilateral Negotiations

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Author Info

  • Charles J. Thomas

    ()
    (Department of Economics, Clemson University)

  • Bart J. Wilson

    ()
    (Economic Science Institute, Chapman University)

Abstract

We experimentally compare first-price auctions and multilateral negotiations after introducing horizontal product differentiation into a standard procurement setting. The two institutions yield the buyer the same surplus, a difference from prior findings with homogeneous products that results from differentiation’s influence on the sellers’ pricing behavior. In particular, we find that introducing product differentiation intensifies price competition among the sellers in some treatments, and has no effect in others, which contrasts with the conventional wisdom that product differentiation softens competition.

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File URL: http://www.chapman.edu/ESI/wp/Wilson_HorizontalDiff.pdf
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Bibliographic Info

Paper provided by Chapman University, Economic Science Institute in its series Working Papers with number 08-03.

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Length: 27 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:chu:wpaper:08-03

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References

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  1. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
  2. Fudenberg, Drew & Tirole, Jean, 1983. "Sequential Bargaining with Incomplete Information," Review of Economic Studies, Wiley Blackwell, vol. 50(2), pages 221-47, April.
  3. Charles J. Thomas & Bart J. Wilson, 2005. "Verifiable Offers and the Relationship Between Auctions and Multilateral Negotiations," Economic Journal, Royal Economic Society, vol. 115(506), pages 1016-1031, October.
  4. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
  5. Waehrer, Keith & Perry, Martin K, 2003. " The Effects of Mergers in Open-Auction Markets," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 287-304, Summer.
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Cited by:
  1. Nicola Doni & Domenico Menicucci, 2011. "Information revelation in procurement auctions with two-sided asymmetric information," Working Papers - Economics wp2011_14.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
  2. Charles J. Thomas, 2012. "An Alternating-Offers Model of Multilateral Negotiations," Working Papers 12-31, Chapman University, Economic Science Institute.

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