How to Win Twice at an Auction. On the Incidence of Commissions in Auction Markets
AbstractWe analyze the welfare consequences of an increase in the commissions charged by the organizer of an auction. Commissions are similar to taxes imposed on buyers and sellers and the economic problem that results looks similar to the question of tax incidence in consumer economics. We argue, however, that auction markets deserve a separate treatment. Indeed we show that an increase in commissions makes sellers worse off, but some (or all) buyers may gain. The results are therefore strikingly different from the standard result that all consumers lose after a tax or a commission increase. We apply our results to comment on the class action against Christie’s and Sotheby’s and argue that the method used to distribute compensations was misguided.
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Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2004.146.
Date of creation: Dec 2004
Date of revision:
Auction; Intermediation; Commissions; Welfare;
Other versions of this item:
- GINSBURGH, Victor & LEGROS, Patrick & SAHUGUET, Nicolas, 2005. "How to win twice at an auction. On the incidence of commissions in auction markets," CORE Discussion Papers 2005005, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Ginsburgh, Victor & Legros, Patrick & Sahuguet, Nicolas, 2005. "How to Win Twice at an Auction: On the Incidence of Commissions in Auction Markets," CEPR Discussion Papers 4876, C.E.P.R. Discussion Papers.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-01-16 (All new papers)
- NEP-COM-2005-01-24 (Industrial Competition)
- NEP-GTH-2005-09-05 (Game Theory)
- NEP-MIC-2005-01-24 (Microeconomics)
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.:
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