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Complements and substitutes in sequential auctions: the case of water auctions

Author

Listed:
  • Javier D. Donna
  • José†Antonio Espín†Sánchez

Abstract

We use data on sequential water auctions to estimate demand when units are complements or substitutes. A sequential English auction model determines the estimating structural equations. When units are complements, one bidder wins all units by paying a high price for the first unit, thus deterring others from bidding on subsequent units. When units are substitutes, different bidders win the units with positive probability, paying prices similar in magnitude. We recover individual demand consistent with this stark pattern of outcomes and confirm it is not collusive but consistent with noncooperative behavior. Demand estimates are biased if one ignores these features.

Suggested Citation

  • Javier D. Donna & José†Antonio Espín†Sánchez, 2018. "Complements and substitutes in sequential auctions: the case of water auctions," RAND Journal of Economics, RAND Corporation, vol. 49(1), pages 87-127, March.
    • Handle: RePEc:bla:randje:v:49:y:2018:i:1:p:87-127
    DOI: 10.1111/1756-2171.12221
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    1. Javier D. Donna & José†Antonio Espín†Sánchez, 2018. "Complements and substitutes in sequential auctions: the case of water auctions," RAND Journal of Economics, RAND Corporation, vol. 49(1), pages 87-127, March.
    2. Donna, Javier & Espin Sanchez, Jose, 2014. "The Illiquidity of Water Markets," MPRA Paper 117166, University Library of Munich, Germany.
    3. Corazzini, Luca & Galavotti, Stefano & Valbonesi, Paola, 2019. "An experimental study on sequential auctions with privately known capacities," Games and Economic Behavior, Elsevier, vol. 117(C), pages 289-315.
    4. Browne, Oliver R. & Ji, Xinde James, 2023. "The Economic Value of Clarifying Property Rights: Evidence from Water in Idaho’s Snake River Basin," Journal of Environmental Economics and Management, Elsevier, vol. 119(C).
    5. JosŽ-Antonio Esp’n-S‡nchez & Charles Hodgson & Kevin OÕNeill, 2025. "Order Statistics as Finite Mixtures," Cowles Foundation Discussion Papers 2455, Cowles Foundation for Research in Economics, Yale University.
    6. Jaworski, Taylor, 2020. "Specification and structure in economic history," Explorations in Economic History, Elsevier, vol. 77(C).
    7. Jeongwoo Lee & Jaeok Park, 2024. "Signaling through entry in auctions with sequential and costly participation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 77(4), pages 1085-1126, June.
    8. Bougt, Daniel & Ghosh, Gagan & Liu, Heng, 2023. "Identification of interdependent values in sequential first-price auctions," International Journal of Industrial Organization, Elsevier, vol. 91(C).
    9. Donna, Javier & Espin Sanchez, Jose, 2014. "Let the Punishment Fit the Criminal," MPRA Paper 67003, University Library of Munich, Germany.
    10. Javier D. Donna & José‐Antonio Espín‐Sánchez, 2021. "Water theft as social insurance: south‐eastern Spain, 1851–1948," Economic History Review, Economic History Society, vol. 74(3), pages 721-753, August.

    More about this item

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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