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Quantifying the cost of excess market thickness in timber sale auctions

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  • Zheng, Xiaoyong

Abstract

In auctions with endogenous entry, theory predicts that too many potential bidders, or the excess market thickness, may actually decrease the seller's expected revenue and the social welfare generated by the auction. This paper proposes a computationally easy method for estimating the optimal number of potential bidders in timber sale auctions with endogenous entry and an uncertain number of active bidders and then quantifies the cost of excess market thickness. It is found that the welfare loss due to the excess market thickness is moderate in this market.

Suggested Citation

  • Zheng, Xiaoyong, 2009. "Quantifying the cost of excess market thickness in timber sale auctions," International Journal of Industrial Organization, Elsevier, vol. 27(5), pages 553-566, September.
  • Handle: RePEc:eee:indorg:v:27:y:2009:i:5:p:553-566
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    References listed on IDEAS

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    Cited by:

    1. Hickman Brent R. & Hubbard Timothy P. & Sağlam Yiğit, 2012. "Structural Econometric Methods in Auctions: A Guide to the Literature," Journal of Econometric Methods, De Gruyter, vol. 1(1), pages 67-106, August.

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