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When Should Sellers Use Auctions?

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  • James W. Roberts
  • Andrew Sweeting
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    Abstract

    A bidding process can be organized so that offers are submitted simultaneously or sequentially. In the latter case, potential buyers can condition their behavior on previous entrants' decisions. The relative performance of these mechanisms is investigated when entry is costly and selective, meaning that potential buyers with higher values are more likely to participate. A simple sequential mechanism can give both buyers and sellers significantly higher payoffs than the commonly used simultaneous bid auction. The findings are illustrated with parameters estimated from simultaneous entry USFS timber auctions where our estimates predict that the sequential mechanism would increase revenue and efficiency.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17624.

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    Date of creation: Nov 2011
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    Publication status: published as “When Should Sellers Use Auctions?” (with Andrew Sweeting). American Economic Review, 103(5) 2013.
    Handle: RePEc:nbr:nberwo:17624

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    1. Paarsch, Harry J., 1997. "Deriving an estimate of the optimal reserve price: An application to British Columbian timber sales," Journal of Econometrics, Elsevier, Elsevier, vol. 78(2), pages 333-357, June.
    2. Preston McAfee, R. & McMillan, John, 1988. "Search mechanisms," Journal of Economic Theory, Elsevier, Elsevier, vol. 44(1), pages 99-123, February.
    3. repec:bla:restud:v:74:y:2007:i:1:p:173-206 is not listed on IDEAS
    4. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262061414, December.
    5. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521551847.
    6. Susan Athey & Dominic Coey & Jonathan Levin, 2013. "Set-Asides and Subsidies in Auctions," American Economic Journal: Microeconomics, American Economic Association, American Economic Association, vol. 5(1), pages 1-27, February.
    7. Daniel Ackerberg, 2009. "A new use of importance sampling to reduce computational burden in simulation estimation," Quantitative Marketing and Economics, Springer, Springer, vol. 7(4), pages 343-376, December.
    8. Ciliberto, Federico & Tamer, Elie, 2009. "Market structure and multiple equilibria in airline markets," MPRA Paper 38635, University Library of Munich, Germany.
    9. Marmer, Vadim & Shneyerov, Artyom & Xu, Pai, 2013. "What model for entry in first-price auctions? A nonparametric approach," Journal of Econometrics, Elsevier, Elsevier, vol. 176(1), pages 46-58.
    10. Betton, Sandra & Eckbo, B Espen & Thorburn, Karin S, 2005. "The Toehold Puzzle," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5084, C.E.P.R. Discussion Papers.
    11. Johannes H�rner & Nicolas Sahuguet, 2007. "Costly Signalling in Auctions -super-1," Review of Economic Studies, Oxford University Press, vol. 74(1), pages 173-206.
    12. Patrick Bajari & Han Hong & Stephen P. Ryan, 2010. "Identification and Estimation of a Discrete Game of Complete Information," Econometrica, Econometric Society, Econometric Society, vol. 78(5), pages 1529-1568, 09.
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