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On the incidence of commissions in auction markets

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  • Ginsburgh, Victor
  • Legros, Patrick
  • Sahuguet, Nicolas

Abstract

We analyze the welfare consequences of an increase in the commissions charged by intermediaries in auction markets. Commissions are similar to taxes imposed on buyers and sellers, and standard economics suggests that both sellers and buyers are made worse off by the tax. However, we show that when the buyers' participation constraint binds and when sellers set optimal reservation prices, the level of commissions correlates to participation and reservation prices in such a way that participating buyers strictly gain from higher commissions.

Suggested Citation

  • Ginsburgh, Victor & Legros, Patrick & Sahuguet, Nicolas, 2010. "On the incidence of commissions in auction markets," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 639-644, November.
    • Handle: RePEc:eee:indorg:v:28:y:2010:i:6:p:639-644
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    1. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721, September.
    2. Paul Klemperer, 2002. "Using and Abusing Economic Theory," Economics Papers 2003-W02, Economics Group, Nuffield College, University of Oxford.
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    Cited by:

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    2. Tri Vi Dang & Florian Morath, 2013. "The Taxation of Bilateral Trade with Endogenous Information," Working Papers tax-mpg-rps-2013-07, Max Planck Institute for Tax Law and Public Finance.
    3. Tri Vi Dang & Xiaoxi Liu & Florian Morath, 2022. "Taxation, Information Acquisition, and Trade in Decentralized Markets: Theory and Test," Working Papers 2022-08, Faculty of Economics and Statistics, Universität Innsbruck.
    4. repec:spo:wpecon:info:hdl:2441/5kht5rc22p99sq5tol4efe4ssb is not listed on IDEAS
    5. Marleen Marra, 2024. "Estimating and Auction Platform Game with Two-Sided Entry," Working Papers hal-03393068, HAL.
    6. repec:hal:spmain:info:hdl:2441/5kht5rc22p99sq5tol4efe4ssb is not listed on IDEAS
    7. repec:hal:wpspec:info:hdl:2441/5kht5rc22p99sq5tol4efe4ssb is not listed on IDEAS
    8. Marie BLUM, 2021. "Auction hosts: are they really impartial?," Working Papers of LaRGE Research Center 2021-09, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    9. repec:spo:wpmain:info:hdl:2441/5kht5rc22p99sq5tol4efe4ssb is not listed on IDEAS

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