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On Favoritism in Auctions with Entry

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Author Info

  • 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. McAfee, R. Preston & McMillan, John, 1989. "Government procurement and international trade," Journal of International Economics, Elsevier, vol. 26(3-4), pages 291-308, May.
  2. Roberto Burguet & Martin K. Perry, 2009. "Preferred suppliers in auction markets," RAND Journal of Economics, RAND Corporation, vol. 40(2), pages 283-295.
  3. Richard Engelbrecht-Wiggans, 1987. "On Optimal Reservation Prices in Auctions," Management Science, INFORMS, vol. 33(6), pages 763-770, June.
  4. Samuelson, William F., 1985. "Competitive bidding with entry costs," Economics Letters, Elsevier, vol. 17(1-2), pages 53-57.
  5. 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.
  6. Gorkem Celik & Okan Yilankaya, 2009. "Optimal Auctions with Simultaneous and Costly Participation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 24.
  7. McAfee, R. Preston & McMillan, John, 1987. "Auctions with entry," Economics Letters, Elsevier, vol. 23(4), pages 343-347.
  8. Riley, John G & Samuelson, William F, 1981. "Optimal Auctions," American Economic Review, American Economic Association, vol. 71(3), pages 381-92, June.
  9. Stegeman, Mark, 1996. "Participation Costs and Efficient Auctions," Journal of Economic Theory, Elsevier, vol. 71(1), pages 228-259, October.
  10. Laffont, Jean-Jacques & Tirole, Jean, 1991. "Auction design and favoritism," International Journal of Industrial Organization, Elsevier, vol. 9(1), pages 9-42, March.
  11. 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.
  12. repec:ebl:ecbull:v:4:y:2006:i:24:p:1-5 is not listed on IDEAS
  13. repec:bla:restud:v:76:y:2009:i:4:p:1397-1429 is not listed on IDEAS
  14. Lee, Joon-Suk, 2008. "Favoritism in asymmetric procurement auctions," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1407-1424, November.
  15. Paulo K. Monteiro & Flavio M. Menezes, 2000. "original papers : Auctions with endogenous participation," Review of Economic Design, Springer, vol. 5(1), pages 71-89.
  16. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June.
  17. Branco, Fernando, 1994. "Favoring domestic firms in procurement contracts," Journal of International Economics, Elsevier, vol. 37(1-2), pages 65-80, August.
  18. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Papers 2004-W09, Economics Group, Nuffield College, University of Oxford.
  19. Paul Klemperer, 2004. "Introduction to Auctions: Theory and Practice," Introductory Chapters, in: Auctions: Theory and Practice Princeton University Press.
  20. Sushil Bikhchandani & Steven A. Lippman & Reade Ryan, 2005. "On the Right-of-First-Refusal," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 0(1), pages 4.
  21. Vagstad, Steinar, 1995. "Promoting fair competition in public procurement," Journal of Public Economics, Elsevier, vol. 58(2), pages 283-307, October.
  22. Lixin Ye, 2004. "Optimal Auctions with Endogenous Entry," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 0(1), pages 8.
  23. J. Riley & E. Maskin, 1981. "Optimal Auctions with Risk Averse Buyers," Working papers 311, Massachusetts Institute of Technology (MIT), Department of Economics.
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Citations

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Cited by:
  1. 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.
  2. 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.

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