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When are Auctions Best?

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  • Jeremy Bulow

    () (Stanford University)

  • Paul Klemperer

    () (Nuffield College, Oxford University)

Abstract

We compare the two most common bidding processes for selling a company or other asset when participation is costly to buyers. In an auction all entry decisions are made prior to any bidding. In a sequential bidding process earlier entrants can make bids before later entrants choose whether to compete. The sequential process is more efficient because entrants base their decisions on superior information. But pre-emptive bids transfer surplus from the seller to buyers. Because the auction is more conducive to entry in several ways it usually generates higher expected revenue.

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File URL: http://www.nuffield.ox.ac.uk/economics/papers/2007/w3/Waab.pdf
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Bibliographic Info

Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2007-W03.

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Length: 38 pages
Date of creation: 09 Jul 2007
Date of revision:
Handle: RePEc:nuf:econwp:0703

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Web page: http://www.nuff.ox.ac.uk/economics/

Related research

Keywords: auctions; jump bidding; sequential sales; procurement; entry.;

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References

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Cited by:
  1. Gino Loyola, 2008. "Optimal takeover contests with toeholds," Economics Working Papers we083217, Universidad Carlos III, Departamento de Economía.

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