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Demand Reduction and Pre-emptive Bidding in Multi-Unit License Auctions Author info | Abstract | Publisher info | Download info | Related research | Statistics Goeree, Jacob K.
Offerman, Theo
Sloof, Randolph
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Multi-unit ascending auctions allow for equilibria in which bidders strategically reduce their demand and split the market at low prices. At the same time, they allow for pre-emptive bidding by incumbent bidders in a coordinated attempt to exclude entrants from the market. We consider an environment where both demand reduction and pre-emptive bidding are supported as equilibrium phenomena of the ascending auction. In a series of experiments, we compare its performance to that of the discriminatory auction. Strategic demand reduction is quite prevalent in the ascending auction even when entry by the newcomer imposes a (large) negative externality on incumbents. As a result, the ascending auction performs worse than the discriminatory auction both in terms of revenue and efficiency, while the two auction formats offer similar chances for newcomers to enter the market.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
4899.
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Date of creation: Feb 2005Date of revision:
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Keywords: demand reduction external effects multi-license auctions Other versions of this item:
Find related papers by JEL classification: C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior D44 - Microeconomics - - Market Structure and Pricing - - - Auctions D45 - Microeconomics - - Market Structure and Pricing - - - Rationing; Licensing
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