The Effect of Bidders' Asymmetries on Expected Revenue in Auctions
AbstractBidders' asymmetries are widespread in auction markets. Yet, their impact on behavior and, ultimately, revenue and profits is still not well understood. In this paper, I define a natural benchmark auction environment to which to compare any private value auction with asymmetrically distributed valuations. I show that the expected revenue from the benchmark auction always dominates that from the asymmetric auction, both in the first price auction and the second price auction. These results formalize and make transparent the idea that competition is reduced by bidders' asymmetries. The paper also contributes to a better understanding of competition and the nature of rents in auction markets. Anonymity of the allocation mechanism seems to be an important factor.
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Bibliographic InfoPaper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1279.
Length: 37 pages
Date of creation: Oct 2000
Date of revision:
Publication status: Published in Games and Economic Behavior (2008), 62: 1-25
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
Other versions of this item:
- Cantillon, Estelle, 2008. "The effect of bidders' asymmetries on expected revenue in auctions," Games and Economic Behavior, Elsevier, vol. 62(1), pages 1-25, January.
- Estelle Cantillon, 2008. "The effect of bidders' asymmetries on expected revenue in auctions," ULB Institutional Repository 2013/9001, ULB -- Universite Libre de Bruxelles.
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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"Investment incentives in procurement auctions,"
ULB Institutional Repository
2013/9005, ULB -- Universite Libre de Bruxelles.
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