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On Favoritism in Auctions with Entry

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  • Leandro Arozamena

    (Universidad Torcuato Di Tella & CONICET)

  • Federico Weinschelbaum

    ()
    (Department of Economics, Universidad de San Andres)

Abstract

We examine the problem of endogenous entry in a single-unit auction when the seller's welfare depends positively on the utility of a subset of potential bidders. We show that, unless the seller values those bidders?welfare more than her own ?private?utility, a nondiscriminatory auction is optimal.

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File URL: ftp://webacademicos.udesa.edu.ar/pub/econ/doc103.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by Universidad de San Andres, Departamento de Economia in its series Working Papers with number 103.

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Length: 10 pages
Date of creation: May 2010
Date of revision: May 2010
Handle: RePEc:sad:wpaper:103

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Keywords: auctions; favoritism; free entry; endogenous number of bidders;

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References

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  1. Federico Weinschelbaum & Leandro Arozamena, 2006. "A Note on the Suboptimality of Right-of-First-Refusal Clauses," Working Papers 92, Universidad de San Andres, Departamento de Economia, revised Jul 2006.
  2. Naegelen, Florence & Mougeot, Michel, 1998. "Discriminatory public procurement policy and cost reduction incentives," Journal of Public Economics, Elsevier, vol. 67(3), pages 349-367, March.
  3. J. Riley & E. Maskin, 1981. "Optimal Auctions with Risk Averse Buyers," Working papers 311, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Celik Gorkem & Yilankaya Okan, 2009. "Optimal Auctions with Simultaneous and Costly Participation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-33, July.
  5. McAfee, R. Preston & McMillan, John, 1987. "Auctions with entry," Economics Letters, Elsevier, vol. 23(4), pages 343-347.
  6. Vagstad, Steinar, 1995. "Promoting fair competition in public procurement," Journal of Public Economics, Elsevier, vol. 58(2), pages 283-307, October.
  7. Samuelson, William F., 1985. "Competitive bidding with entry costs," Economics Letters, Elsevier, vol. 17(1-2), pages 53-57.
  8. Roberto Burguet & Martin K. Perry, 2008. "Preferred Suppliers in Auction Markets," UFAE and IAE Working Papers 752.08, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  9. Laffont, Jean-Jacques & Tirole, Jean, 1991. "Auction design and favoritism," International Journal of Industrial Organization, Elsevier, vol. 9(1), pages 9-42, March.
  10. Riley, John G & Samuelson, William F, 1981. "Optimal Auctions," American Economic Review, American Economic Association, vol. 71(3), pages 381-92, June.
  11. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Papers 2004-W09, Economics Group, Nuffield College, University of Oxford.
  12. McAfee, R. Preston & McMillan, John, 1989. "Government procurement and international trade," Journal of International Economics, Elsevier, vol. 26(3-4), pages 291-308, May.
  13. Bikhchandani Sushil & Lippman Steven A. & Ryan Reade, 2005. "On the Right-of-First-Refusal," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 5(1), pages 1-44, April.
  14. Paulo K. Monteiro & Flavio M. Menezes, 2000. "original papers : Auctions with endogenous participation," Review of Economic Design, Springer, vol. 5(1), pages 71-89.
  15. Ye Lixin, 2004. "Optimal Auctions with Endogenous Entry," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 4(1), pages 1-29, October.
  16. Tong Li & Xiaoyong Zheng, 2009. "Entry and Competition Effects in First-Price Auctions: Theory and Evidence from Procurement Auctions," Review of Economic Studies, Oxford University Press, vol. 76(4), pages 1397-1429.
  17. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June.
  18. repec:ebl:ecbull:v:4:y:2006:i:24:p:1-5 is not listed on IDEAS
  19. Richard Engelbrecht-Wiggans, 1987. "On Optimal Reservation Prices in Auctions," Management Science, INFORMS, vol. 33(6), pages 763-770, June.
  20. Paul Klemperer, 2004. "Introduction to Auctions: Theory and Practice
    [Auctions: Theory and Practice]
    ," Introductory Chapters, Princeton University Press.
  21. Lee, Joon-Suk, 2008. "Favoritism in asymmetric procurement auctions," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1407-1424, November.
  22. Stegeman, Mark, 1996. "Participation Costs and Efficient Auctions," Journal of Economic Theory, Elsevier, vol. 71(1), pages 228-259, October.
  23. Branco, Fernando, 1994. "Favoring domestic firms in procurement contracts," Journal of International Economics, Elsevier, vol. 37(1-2), pages 65-80, August.
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Cited by:
  1. Martin Gonzalez-Rozada & Martin sola & Constantino Hevia & Fabio Spagnolo, 2012. "Estimating and Forecasting the Yield Curve Using a Markov Switching Dynamic Nelson and Siegel Model," Department of Economics Working Papers 2012-07, Universidad Torcuato Di Tella.
  2. Federico Weinschelbaum & Leandro Arozamena & Nicolas Shunda, 2012. "Optimal nondiscriminatory auctions with favoritism," Working Papers 110, Universidad de San Andres, Departamento de Economia, revised Mar 2012.

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