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The Buyer's Option in Multi-Unit Ascending Auctions: The Case of Wine Auctions at Drouot


  • Philippe Février
  • William Roos
  • Michael Visser


"This paper studies multi-unit ascending (English) auctions with a buyer's option. The buyer's option gives the winner of an auction the right to purchase any number of units at the winning price. We develop a theoretical model and derive the optimal strategies for the bidders. The model predicts various behavioral implications (e.g., the winner never exercises the option, the price declines…) that are tested using a unique data set on wine auctions held at the Paris-based auction house Drouot. We also analyze why the buyer's option is used. Estimating the model in a structural econometric way, and using counterfactual comparisons, we find that the buyer's option does not affect the seller's revenue (relative to a system where the units are auctioned sequentially without the option). Drouot, however, saves a lot of time with the option and this effect represents a considerable amount of money. The time-saving effect seems thus to be the primary purpose of the buyer's option." Copyright Blackwell Publishing 2005.

Suggested Citation

  • Philippe Février & William Roos & Michael Visser, 2005. "The Buyer's Option in Multi-Unit Ascending Auctions: The Case of Wine Auctions at Drouot," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(4), pages 813-847, December.
  • Handle: RePEc:bla:jemstr:v:14:y:2005:i:4:p:813-847

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    References listed on IDEAS

    1. Iversen, Tor, 1997. "The effect of a private sector on the waiting time in a national health service," Journal of Health Economics, Elsevier, vol. 16(4), pages 381-396, August.
    2. Carol Propper, 1995. "The Disutility of Time Spent on the United Kingdom's National Health Service Waiting Lists," Journal of Human Resources, University of Wisconsin Press, vol. 30(4), pages 677-700.
    3. Iversen, Tor, 1993. "A theory of hospital waiting lists," Journal of Health Economics, Elsevier, vol. 12(1), pages 55-71, April.
    4. Feldstein, Martin S, 1970. "The Rising Price of Physicians' Services," The Review of Economics and Statistics, MIT Press, vol. 52(2), pages 121-133, May.
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    Cited by:

    1. Todd R. Kaplan & Shmuel Zamir, 2014. "Advances in Auctions," Discussion Papers 1405, Exeter University, Department of Economics.
    2. Ali, Héla Hadj & Lecocq, Sébastien & Visser, Michael, 2010. "The Impact of Gurus: Parker Grades and en primeur Wine Prices," Journal of Wine Economics, Cambridge University Press, vol. 5(01), pages 22-39, March.
    3. Kaplan, Todd R. & Zamir, Shmuel, 2015. "Advances in Auctions," Handbook of Game Theory with Economic Applications, Elsevier.
    4. Philippe Février & Laurent Linnemer & Michael Visser, 2007. "Buy or wait, that is the option: the buyer's option in sequential laboratory auctions," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 98-118, March.
    5. Rosato, Antonio, 2014. "Loss Aversion in Sequential Auctions: Endogenous Interdependence, Informational Externalities and the "Afternoon Effect"," MPRA Paper 56824, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions


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