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When are Auctions Best?

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Author Info

  • Paul Klemperer
  • Jeremy Bulow

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 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.nuff.ox.ac.uk/economics/papers/2007/w3/Waab.pdf
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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 2007-W03.

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Date of creation: 01 Jun 2007
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Handle: RePEc:oxf:wpaper:2007-w03

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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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