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Auctioning horizontally differentiated items

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  • Sarah Parlane

Abstract

This paper analyses strategic market allocation by two auctioneers holding substitutes. It characterizes both the cooperative and competitive outcomes. Under cooperation or competition with close substitutes, bidders are allocated according to the expected total surplus each generates. This market division is efficient if and only if the distribution of bidders' tastes is not skewed. If skewed, reserve prices distort participation towards the least preferred item. For greater degrees of product differentiation competition leads to multiple equilibria. Finally, competition with close substitutes sellers leave participation rents to their weakest bidder. They do not in other cases, whether they compete or cooperate.

Suggested Citation

  • Sarah Parlane, 2005. "Auctioning horizontally differentiated items," Working Papers 200525, School of Economics, University College Dublin.
  • Handle: RePEc:ucn:wpaper:200525
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    File URL: http://hdl.handle.net/10197/682
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    References listed on IDEAS

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    1. Lars A. Stole, 1995. "Nonlinear Pricing and Oligopoly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(4), pages 529-562, December.
    2. Bulow, Jeremy & Roberts, John, 1989. "The Simple Economics of Optimal Auctions," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1060-1090, October.
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    6. Burguet, Roberto & Sakovics, Jozsef, 1999. "Imperfect Competition in Auction Designs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(1), pages 231-247, February.
    7. Chen, Yongmin & Wang, Ruqu, 2004. "A model of competing selling mechanisms," Economics Letters, Elsevier, vol. 85(2), pages 151-155, November.
    8. Peters, Michael & Severinov, Sergei, 1997. "Competition among Sellers Who Offer Auctions Instead of Prices," Journal of Economic Theory, Elsevier, vol. 75(1), pages 141-179, July.
    9. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    10. Roberto Burguet & Auctions, "undated". "The Condominium Problem," Working Papers 63, Barcelona School of Economics.
    11. Roberto Burguet, 2005. "The condominium problem; auctions for substitutes," Review of Economic Design, Springer;Society for Economic Design, vol. 9(2), pages 73-90, April.
    12. Parlane, S., 1998. "Contracting with Capacity Constrained Suppliers," Papers 98/4, College Dublin, Department of Political Economy-.
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    Cited by:

    1. Landi, Massimiliano & Menicucci, Domenico & Sarychev, Andrey, 2023. "Competing auctions with non-identical objects," Journal of Mathematical Economics, Elsevier, vol. 106(C).
    2. Thomas Kittsteiner & Marion Ott & Richard Steinberg, 2022. "Competing Combinatorial Auctions," Information Systems Research, INFORMS, vol. 33(4), pages 1130-1137, December.
    3. Deltas, George & Jeitschko, Thomas D., 2007. "Auction hosting site pricing and market equilibrium with endogenous bidder and seller participation," International Journal of Industrial Organization, Elsevier, vol. 25(6), pages 1190-1212, December.

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    More about this item

    Keywords

    Competition; Auctions; Reserve prices; Efficiency; Auctions--Mathematical models; Competition; Pricing;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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