Multi-license ascending auctions have been criticized because they allow bidders to reduce their demand and split the market at low prices. At the same time, it has been argued that the ascending auction is a suitable format for a seller who wants to exploit preemptive motives. Incumbent firms may bid above their use values in a coordinated attempt to keep the weak entrant(s) out of the market. This process may boost revenue. In this paper, we look at environments where demand reduction and preemptive bidding are both supported as equilibrium of the ascending auction. In a series of experiments, we compare the performance of the ascending auction with the first-price auction. We observe many instances of strategic demand reduction in the ascending auction, even when entry by the newcomer leads to strong negative effects for the incumbents. As a result, the ascending auction is outperformed by the first-price auction, both in terms of revenue and in terms of efficiency.
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Publisher Info
Paper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number
394.
Length: Date of creation: 2004 Date of revision: Handle: RePEc:red:sed004:394
Contact details of provider: Postal: Society for Economic Dynamics Anne Stubing CV Starr Center for Applied Economics 269 Mercer Street, Room 303 New York University New York, NY 10003 Fax: 1-860-486-4463 Email: Web page: http://www.EconomicDynamics.org/society.htm More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Christian Zimmermann).