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On bidding markets: the role of competition

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Author Info
Gino Loyola ()

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Abstract

This paper analyzes the effects of industrial concentration on bidding behaviour and hence, on the seller´s expected proceeds. These effects are studied under the CIPI model, an affiliated value set-up that nests a variety of valuation and information environments. We formally decompose the revenue effects coming from less competition into four types: a competition effect, an inference effect, a winner´s curse effect and a sampling effect. The properties of these effects are discussed and conditions for (non) monotonicity of both the equilibrium bid and revenue are stated. Our results suggest that it is more likely that the seller benefits from less competition in markets with more complete valuation and information structures.

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Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we083318.

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Date of creation: Jan 2008
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Handle: RePEc:cte:werepe:we083318

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Related research
Keywords: Auctions; Competition; Affiliation; Inference;

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Find related papers by JEL classification:
C62 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Existence and Stability Conditions of Equilibrium
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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  1. Li, Tong & Perrigne, Isabelle & Vuong, Quang, 2000. "Conditionally independent private information in OCS wildcat auctions," Journal of Econometrics, Elsevier, vol. 98(1), pages 129-161, September. [Downloadable!] (restricted)
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    Other versions:
  3. Athias, Laure & Nunez, Antonio, 2008. "The more the merrier? Number of bidders, information dispersion, renegotiation and winner’s curse in toll road concessions," MPRA Paper 10539, University Library of Munich, Germany. [Downloadable!]
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  5. Olivier Compte & Philippe Jehiel, 2002. "On the Value of Competition in Procurement Auctions," Econometrica, Econometric Society, vol. 70(1), pages 343-355, January. [Downloadable!] (restricted)
    Other versions:
  6. Paul Klemperer, 2005. "Bidding Markets," Law and Economics 0508007, EconWPA. [Downloadable!]
  7. Waehrer, Keith, 1999. "Asymmetric private values auctions with application to joint bidding and mergers," International Journal of Industrial Organization, Elsevier, vol. 17(3), pages 437-452, April. [Downloadable!] (restricted)
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  9. Marshall Robert C. & Meurer Michael J. & Richard Jean-Francois & Stromquist Walter, 1994. "Numerical Analysis of Asymmetric First Price Auctions," Games and Economic Behavior, Elsevier, vol. 7(2), pages 193-220, September. [Downloadable!] (restricted)
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  12. Hong, Han & Shum, Matthew, 2002. "Increasing Competition and the Winner's Curse: Evidence from Procurement," Review of Economic Studies, Blackwell Publishing, vol. 69(4), pages 871-98, October.
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  13. Luciano I. de Castro, 2007. "Affiliation, equilibrium existence and the revenue ranking of auctions," Economics Working Papers we074622, Universidad Carlos III, Departamento de Economía. [Downloadable!]
  14. Hendricks, Kenneth & Porter, Robert H, 1992. "Joint Bidding in Federal OCS Auctions," American Economic Review, American Economic Association, vol. 82(2), pages 506-11, May. [Downloadable!] (restricted)
  15. Larry M. DeBrock & James L. Smith, 1983. "Joint Bidding, Information Pooling, and the Performance of Petroleum Lease Auctions," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 395-404, Autumn. [Downloadable!] (restricted)
  16. Mailath, George J. & Zemsky, Peter, 1991. "Collusion in second price auctions with heterogeneous bidders," Games and Economic Behavior, Elsevier, vol. 3(4), pages 467-486, November. [Downloadable!] (restricted)
  17. Steven Tschantz, Philip Crooke, Luke Froeb, 2000. "Mergers in Sealed versus Oral Auctions," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 7(2), pages 201-212, July. [Downloadable!] (restricted)
  18. Pesendorfer, Martin, 2000. "A Study of Collusion in First-Price Auctions," Review of Economic Studies, Blackwell Publishing, vol. 67(3), pages 381-411, July.
  19. Vlad Mares & Mikhael Shor, 2008. "Industry concentration in common value auctions: theory and evidence," Economic Theory, Springer, vol. 35(1), pages 37-56, April. [Downloadable!] (restricted)
  20. Jeremy Bulow & Paul Klemperer, 2002. "Prices and the Winner's Curse," RAND Journal of Economics, The RAND Corporation, vol. 33(1), pages 1-21, Spring.
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  21. Baldwin, Laura H & Marshall, Robert C & Richard, Jean-Francois, 1997. "Bidder Collusion at Forest Service Timber Sales," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 657-99, August.
  22. Dalkir, Serdar & Logan, John W. & Masson, Robert T., 2000. "Mergers in symmetric and asymmetric noncooperative auction markets: the effects on prices and efficiency," International Journal of Industrial Organization, Elsevier, vol. 18(3), pages 383-413, April. [Downloadable!] (restricted)
  23. Wilson, Robert, 1992. "Strategic analysis of auctions," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 8, pages 227-279 Elsevier. [Downloadable!] (restricted)
  24. Marc S. Robinson, 1985. "Collusion and the Choice of Auction," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 141-145, Spring. [Downloadable!] (restricted)
  25. McAfee, R Preston & McMillan, John, 1992. "Bidding Rings," American Economic Review, American Economic Association, vol. 82(3), pages 579-99, June. [Downloadable!] (restricted)
    Other versions:
    • McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  26. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September. [Downloadable!] (restricted)
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  27. Kreps, David M & Wilson, Robert, 1982. "Sequential Equilibria," Econometrica, Econometric Society, vol. 50(4), pages 863-94, July. [Downloadable!] (restricted)
    Other versions:
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