Creating competition out of thin air: Market thickening and right-to-choose auctions
AbstractWe study a procedure for selling multiple heterogenous goods, which is commonly used in practice but rarely studied in the literature. The novel feature of this procedure is that instead of selling the goods themselves, the seller offers buyers the right to choose among the available goods. Thus, buyers who are after completely different goods are forced to compete for the same good, the âright to chooseâ. Competition can be further enhanced by restricting the number of rights that are sold. This is shown both theoretically and experimentally. Our main experimental finding is that by auctioning ârights-to-chooseâ rather than the goods themselves, the seller induces an aggressive bidding behaviour that generates more revenue than the theoretical optimal mechanism.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by UCLA Department of Economics in its series Theory workshop papers with number 658612000000000047.
Date of creation: 30 Oct 2003
Date of revision:
Contact details of provider:
Web page: http://www.dklevine.com/
Other versions of this item:
- Eliaz, Kfir & Offerman, Theo & Schotter, Andrew, 2004. "Creating Competition Out of Thin Air: Market Thickening and Right-to-Choose Auctions," CEPR Discussion Papers 4678, C.E.P.R. Discussion Papers.
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-11-03 (All new papers)
- NEP-COM-2003-11-03 (Industrial Competition)
- NEP-IND-2003-11-03 (Industrial Organization)
- NEP-MFD-2003-11-03 (Microfinance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Menezes, Flavio M & Monteiro, Paulo Klinger, 1998.
"Simultaneous Pooled Auctions,"
The Journal of Real Estate Finance and Economics,
Springer, vol. 17(3), pages 219-32, November.
- David Lucking-Reiley & John A. List, 2000. "Demand Reduction in Multiunit Auctions: Evidence from a Sportscard Field Experiment," American Economic Review, American Economic Association, vol. 90(4), pages 961-972, September.
- Ashenfelter, O. & Genesove, D., 1992.
"Testing for Price Anomalies in Real Estate Auctions,"
92-2, Massachusetts Institute of Technology (MIT), Department of Economics.
- Ashenfelter, Orley & Genesove, David, 1992. "Testing for Price Anomalies in Real-Estate Auctions," American Economic Review, American Economic Association, vol. 82(2), pages 501-05, May.
- Ashenfelter, O. & Genesove, D., 1992. "Testing for Price Anomalies in real Estate Auctions," Papers 128, Princeton, Department of Economics - Financial Research Center.
- Orley Ashenfelter & David Genesove, 1992. "Testing for Price Anomalies in Real Estate Auctions," NBER Working Papers 4036, National Bureau of Economic Research, Inc.
- Klemperer, Paul, 1999.
"Auction Theory: a Guide to the Literature,"
CEPR Discussion Papers
2163, C.E.P.R. Discussion Papers.
- Noussair, Charles, 1995.
"Equilibria in a Multi-object Uniform Price Sealed Bid Auction with Multi-unit Demands,"
Springer, vol. 5(2), pages 337-51, March.
- Noussair, C.N., 1995. "Equilibria in a multi-object uniform price sealed bid auction with multi-unit demands," Open Access publications from Tilburg University urn:nbn:nl:ui:12-381122, Tilburg University.
- Gale Ian L. & Hausch Donald B., 1994. "Bottom-Fishing and Declining Prices in Sequential Auctions," Games and Economic Behavior, Elsevier, vol. 7(3), pages 318-331, November.
- repec:att:wimass:9215 is not listed on IDEAS
- Goeree, Jacob K. & Offerman, Theo, 2003. "Winner's curse without overbidding," European Economic Review, Elsevier, vol. 47(4), pages 625-644, August.
- Roberto Burguet, 2005.
"The condominium problem; auctions for substitutes,"
Review of Economic Design,
Springer, vol. 9(2), pages 73-90, 04.
- Kagel, John H & Levin, Dan, 2001. "Behavior in Multi-unit Demand Auctions: Experiments with Uniform Price and Dynamic Vickrey Auctions," Econometrica, Econometric Society, vol. 69(2), pages 413-54, March.
- Burguet, Roberto, 2007.
"Right to choose in oral auctions,"
Elsevier, vol. 95(2), pages 167-173, May.
- Salmon, Timothy C. & Iachini, Michael, 2007. "Continuous ascending vs. pooled multiple unit auctions," Games and Economic Behavior, Elsevier, vol. 61(1), pages 67-85, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David K. Levine).
If references are entirely missing, you can add them using this form.