Advanced Search
MyIDEAS: Login to save this paper or follow this series

Demand reduction and preemptive bidding in multi-unit license auctions

Contents:

Author Info

  • Jacob K. Goeree
  • Theo Offerman
  • Randolph Sloof

Abstract

Multi-unit ascending auctions allow for equilibria in which bidders strategically reduce their demand and split the market at low prices. At the same time, they allow for preemptive bidding by incumbent bidders in a coordinated attempt to exclude entrants from the market. We consider an environment where both demand reduction and preemptive bidding are supported as equilibrium phenomena of the ascending auction. In a series of experiments, we compare its performance to that of the discriminatory auction. Strategic demand reduction is quite prevalent in the ascending auction even when entry imposes a (large) negative externality on incumbents. As a result, the ascending auction performs worse than the discriminatory auction both in terms of revenue and efficiency, while entrants chances are similar across the two formats.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.iew.uzh.ch/wp/iewwp430.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 430.

as in new window
Length:
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:zur:iewwpx:430

Contact details of provider:
Postal: Blümlisalpstrasse 10, CH-8006 Zürich
Phone: +41-1-634 22 05
Fax: +41-1-634 49 07
Email:
Web page: http://www.econ.uzh.ch/
More information through EDIRC

Related research

Keywords: Multi-license auctions; demand reduction; external effects; preemption;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Paul Klemperer, 2001. "How (Not) to Run Auctions: The European 3G Telecom Auctions," Economics Series Working Papers 2002-W05, University of Oxford, Department of Economics.
  2. Kagel, John H. & Levin, Dan, 2005. "Multi-unit demand auctions with synergies: behavior in sealed-bid versus ascending-bid uniform-price auctions," Games and Economic Behavior, Elsevier, Elsevier, vol. 53(2), pages 170-207, November.
  3. Veronika Grimm & Frank Riedel & Elmar G. Wolfstetter, 2000. "Implementing Efficient Market Structure," CESifo Working Paper Series 269, CESifo Group Munich.
  4. Peter Cramton & Jesse Schwartz, 2000. "Collusive Bidding: Lessons from the FCC Spectrum Auctions," Papers of Peter Cramton 00jre, University of Maryland, Department of Economics - Peter Cramton, revised 09 Mar 1999.
  5. Lawrence M. Ausubel & Peter Cramton, 1995. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Papers of Peter Cramton 98wpdr, University of Maryland, Department of Economics - Peter Cramton, revised 22 Jul 2002.
  6. Dufwenberg, M. & Gneezy, U., 1998. "Price competition and market concentration: An experimental study," Discussion Paper, Tilburg University, Center for Economic Research 1998-27, Tilburg University, Center for Economic Research.
  7. Jehiel, Phillipe & Moldovanu, Benny, 1999. "Efficient Design with Interdependent Valuations," Sonderforschungsbereich 504 Publications, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim 99-74, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  8. Dirk Engelmann & Veronika Grimm, 2004. "Bidding Behavior In Multi-Unit Auctions - An Experimental Investigation And Some Theoretical Insights," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2004-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  9. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1999. "Multidimensional Mechanism Design for Auctions with Externalities," Journal of Economic Theory, Elsevier, Elsevier, vol. 85(2), pages 258-293, April.
  10. Noussair, Charles, 1995. "Equilibria in a Multi-object Uniform Price Sealed Bid Auction with Multi-unit Demands," Economic Theory, Springer, Springer, vol. 5(2), pages 337-51, March.
  11. Dirk Engelmann & Veronika Grimm, 2006. "Bidding Behavior in Multi-Unit Auctions - An Experimental Investigation," Working Paper Series in Economics, University of Cologne, Department of Economics 24, University of Cologne, Department of Economics.
  12. Grimm, Veronika & Riedel, Frank & Wolfstetter, Elmar, 2003. "Low price equilibrium in multi-unit auctions: the GSM spectrum auction in Germany," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 21(10), pages 1557-1569, December.
  13. Klaus Abbink & Jordi Brandts, 2002. "Price competition under cost uncertainty: A laboratory analysis," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 550.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  14. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1996. "How (Not) to Sell Nuclear Weapons," American Economic Review, American Economic Association, American Economic Association, vol. 86(4), pages 814-29, September.
  15. Kagel, John H & Levin, Dan, 2001. "Behavior in Multi-unit Demand Auctions: Experiments with Uniform Price and Dynamic Vickrey Auctions," Econometrica, Econometric Society, Econometric Society, vol. 69(2), pages 413-54, March.
  16. Richard Engelbrecht-Wiggans & Charles M. Kahn, 1998. "Multi-unit auctions with uniform prices," Economic Theory, Springer, Springer, vol. 12(2), pages 227-258.
  17. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Series Working Papers 2004-W09, University of Oxford, Department of Economics.
  18. Philippe Jehiel & Benny Moldovanu, 2000. "Auctions with Downstream Interaction Among Buyers," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 768-791, Winter.
  19. Gopal Das Varma, 2002. "Standard Auctions with Identity-Dependent Externalities," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 689-708, Winter.
  20. Alsemgeest, Paul & Noussair, Charles & Olson, Mark, 1998. "Experimental Comparisons of Auctions under Single- and Multi-Unit Demand," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 36(1), pages 87-97, January.
  21. Paul Klemperer, 2003. "Using and Abusing Economic Theory," Economics Series Working Papers 2003-W02, University of Oxford, Department of Economics.
  22. Moldovanu, Benny & Ewerhart II, Christian, 2002. "A Stylized Model of the German UMTS Auction," Sonderforschungsbereich 504 Publications, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim 02-07, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  23. Robert J. Weber, 1997. "Making More from Less: Strategic Demand Reduction in the FCC Spectrum Auctions," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 6(3), pages 529-548, 09.
  24. Spulber, Daniel F, 1995. "Bertrand Competition When Rivals' Costs Are Unknown," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 43(1), pages 1-11, March.
  25. Peter Cramton, 2002. "Spectrum Auctions," Papers of Peter Cramton 01hte, University of Maryland, Department of Economics - Peter Cramton, revised 16 Jul 2001.
  26. Paul Klemperer, 2004. "Introduction to Auctions: Theory and Practice
    [Auctions: Theory and Practice]
    ," Introductory Chapters, Princeton University Press, Princeton University Press.
  27. Bernard Lebrun & Marie-Christine Tremblay, 2003. "Multiunit Pay-Your-Bid Auction with One-Dimensional Multiunit Demands," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(3), pages 1135-1172, 08.
  28. David Lucking-Reiley & John A. List, 2000. "Demand Reduction in Multiunit Auctions: Evidence from a Sportscard Field Experiment," American Economic Review, American Economic Association, American Economic Association, vol. 90(4), pages 961-972, September.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Regina Betz & Ben Greiner & Sascha Schweitzer & Stefan Seifert, 2014. "Auction Format and Auction Sequence in Multi-Item Multi-Unit Auctions - An experimental study," Discussion Papers, School of Economics, The University of New South Wales 2014-31, School of Economics, The University of New South Wales.
  2. Hu, Youxin & Kagel, John & Xu, Xiaoshu & Ye, Lixin, 2013. "Theoretical and experimental analysis of auctions with negative externalities," Games and Economic Behavior, Elsevier, Elsevier, vol. 82(C), pages 269-291.
  3. Todd R. Kaplan & Shmuel Zamir, 2014. "Advances in Auctions," Discussion Paper Series, The Center for the Study of Rationality, Hebrew University, Jerusalem dp662, The Center for the Study of Rationality, Hebrew University, Jerusalem.
  4. Pagnozzi, Marco & Saral, Krista Jabs, 2013. "Multi-Object Auctions with Resale: An Experimental Analysis," MPRA Paper 43665, University Library of Munich, Germany.
  5. Steven Tucker & Charles Noussair & Anthony M. Kwasnica & Katerina Sherstyuk, 2013. "Multiunit Auctions," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 27(3), pages 461-490, 07.
  6. Goeree, Jacob K. & Offerman, Theo & Schram, Arthur, 2006. "Using first-price auctions to sell heterogeneous licenses," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 24(3), pages 555-581, May.
  7. Burtraw, Dallas & Goeree, Jacob & Holt, Charles & Myers, Erica & Palmer, Karen & Shobe, William, 2010. "Price Discovery in Emissions Permit Auctions," Discussion Papers, Resources For the Future dp-10-32, Resources For the Future.
  8. Burtraw, Dallas & Goeree, Jacob & Holt, Charles A. & Myers, Erica & Palmer, Karen & Shobe, William, 2008. "Collusion in Auctions for Emission Permits: An Experimental Analysis," Discussion Papers, Resources For the Future dp-08-36, Resources For the Future.
  9. He, Haoran & Chen, Yefeng & Last Name, First Name, 2014. "Auction Mechanisms for Allocating Subsidies for Carbon Emissions Reduction: An Experimental Investigation," Discussion Papers, Resources For the Future dp-14-06-efd, Resources For the Future.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:zur:iewwpx:430. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marita Kieser).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.