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The Economics of Contingent Re-auctions

Author

Listed:
  • Sandro Brusco
  • Giuseppe Lopomo
  • Leslie M. Marx

Abstract

We consider an auction environment where an object can be sold with usage restrictions that generate benefits to the seller but decrease buyers' valuations. In this environment, sellers such as the FCC have used "contingent re-auctions," offering the restricted object with a reserve price, but re-auctioning it without restrictions if the reserve is not met. We show that contingent re-auctions are generally neither efficient nor optimal for the seller. We propose an alternative "exclusive-buyer mechanism" that can implement the efficient outcome in dominant strategies. In certain environments, parameters can be chosen so the seller's surplus is maximized across all selling procedures. (JEL D44, D82, H82)

Suggested Citation

  • Sandro Brusco & Giuseppe Lopomo & Leslie M. Marx, 2011. "The Economics of Contingent Re-auctions," American Economic Journal: Microeconomics, American Economic Association, vol. 3(2), pages 165-193, May.
  • Handle: RePEc:aea:aejmic:v:3:y:2011:i:2:p:165-93
    Note: DOI: 10.1257/mic.3.2.165
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    References listed on IDEAS

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    Cited by:

    1. Peter Cramton & Evan Kwerel & Gregory Rosston & Andrzej Skrzypacz, 2011. "Using Spectrum Auctions to Enhance Competition in Wireless Services," Journal of Law and Economics, University of Chicago Press, vol. 54(S4), pages 167-188.
    2. Bajari, Patrick & Yeo, Jungwon, 2009. "Auction design and tacit collusion in FCC spectrum auctions," Information Economics and Policy, Elsevier, vol. 21(2), pages 90-100, June.
    3. Gregory Crawford & Evan Kwerel & Jonathan Levy, 2008. "Economics at the FCC: 2007–2008," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 33(3), pages 187-210, November.
    4. Matoso, Rafael & Rezende, Marcelo, 2014. "Asymmetric information in oil and gas lease auctions with a national company," International Journal of Industrial Organization, Elsevier, vol. 33(C), pages 72-82.
    5. Brusco, Sandro & Lopomo, Giuseppe & Marx, Leslie M., 2009. "The [`]Google effect' in the FCC's 700Â MHz auction," Information Economics and Policy, Elsevier, vol. 21(2), pages 101-114, June.
    6. Simon Loertscher & Leslie M. Marx & Tom Wilkening, 2015. "A Long Way Coming: Designing Centralized Markets with Privately Informed Buyers and Sellers," Journal of Economic Literature, American Economic Association, vol. 53(4), pages 857-897, December.

    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H82 - Public Economics - - Miscellaneous Issues - - - Governmental Property

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