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Does a Seller Really Want Another Bidder?

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Abstract

Several papers compare auctioning heterogeneous assets sequentially with sequentially selling the right to choose among assets not yet taken. Typically motivated by auctions of condos for owner occupation, these papers have assumed that each winning bidder exits, so each successive auction has less competition. In many heterogeneous-asset-sale situations, a winning bidder may still be interested in acquiring further assets. We build a simple model of persistent competition, in which the distribution of equilibrium revenue from separate sales is shown to be a mean-preserving spread of the distribution of revenue from selling rights to choose. Persistent competition reveals that a high bidder does not always select his most preferred asset, and that one asset being slightly more likely to be a favored asset discontinuously affects equilibrium bidding.

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Bibliographic Info

Paper provided by Department of Economics, University of Missouri in its series Working Papers with number 0909.

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Length: 12 pgs.
Date of creation: 15 Jun 2009
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Handle: RePEc:umc:wpaper:0909

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Keywords: auction theory; rights-to-choose auctions; revenue comparisons; persistent competition; private information;

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  1. Laffont, Jean-Jacques, 1997. "Game theory and empirical economics: The case of auction data 1," European Economic Review, Elsevier, vol. 41(1), pages 1-35, January.
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  3. Eliaz, Kfir & Offerman, Theo & Schotter, Andrew, 2008. "Creating competition out of thin air: An experimental study of right-to-choose auctions," Games and Economic Behavior, Elsevier, vol. 62(2), pages 383-416, March.
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  10. Roberto Burguet, . "Right To Choose In Oral Auctions," UFAE and IAE Working Papers 439.99, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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  31. repec:att:wimass:9215 is not listed on IDEAS
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Cited by:
  1. Ronald M Harstad, 2011. "Endogenous Competition Alters the Structure of Optimal Auctions," ISER Discussion Paper 0816, Institute of Social and Economic Research, Osaka University.

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