When are Auctions Best?
AbstractWe 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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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 2007-W03.
Date of creation: 01 Jun 2007
Date of revision:
Auctions; Jump Bidding; Sequential Sales; Procurement; Entry;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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