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Auctions with endogenous valuations: the snowball effect revisited

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  • Kala Krishna

    (Department of Economics, Pennsylvania State University, Kern Graduate Building, University Park, PA 16802, USA)

Abstract

This paper looks at the determination of ownership of capacity when there are two ex-ante symmetric agents bidding for many units of capacity which are sold sequentially. It is shown that convexity of payoffs in the final stage of the game is sufficient to ensure monopolization of capacity, but that increasing returns to scale are not sufficient to ensure monopolization.

Suggested Citation

  • Kala Krishna, 1999. "Auctions with endogenous valuations: the snowball effect revisited," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 13(2), pages 377-391.
    • Handle: RePEc:spr:joecth:v:13:y:1999:i:2:p:377-391
    Note: Received: March 14, 1997; revised version: December 1, 1997
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    References listed on IDEAS

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    1. Eric S. Maskin & John G. Riley, 1981. "Multi-unit Auctions, Price Discrimination and Bundling," UCLA Economics Working Papers 201, UCLA Department of Economics.
    2. B. Douglas Bernheim & Michael D. Whinston, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(1), pages 1-31.
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    4. Pitchik, Carolyn, 2009. "Budget-constrained sequential auctions with incomplete information," Games and Economic Behavior, Elsevier, vol. 66(2), pages 928-949, July.
    5. Ashenfelter, Orley, 1989. "How Auctions Work for Wine and Art," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 23-36, Summer.
    6. repec:fth:harver:1484 is not listed on IDEAS
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    Cited by:

    1. van Damme, Eric, 2002. "The European UMTS-auctions," European Economic Review, Elsevier, vol. 46(4-5), pages 846-858, May.
    2. Bruno Larue & Mohamed Jeddy & Sébastien Pouliot, 2013. "On the Number of Bidders and Auction Performance: when More Means Less," Cahiers de recherche CREATE 2013-4, CREATE.
    3. Robert C. Feenstra & Tracy Lewis & John McMillan, 1990. "Designing Policy To Open Trade," Economics and Politics, Wiley Blackwell, vol. 2(3), pages 223-240, November.
    4. Gebhardt, Georg & Wambach, Achim, 2008. "Auctions to implement the efficient market structure," International Journal of Industrial Organization, Elsevier, vol. 26(3), pages 846-859, May.
    5. Heidrun C. Hoppe & Philippe Jehiel & Benny Moldovanu, 2006. "License Auctions and Market Structure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(2), pages 371-396, June.
    6. Gale, Ian L. & Stegeman, Mark, 2001. "Sequential Auctions of Endogenously Valued Objects," Games and Economic Behavior, Elsevier, vol. 36(1), pages 74-103, July.
    7. Pitchik, Carolyn, 2009. "Budget-constrained sequential auctions with incomplete information," Games and Economic Behavior, Elsevier, vol. 66(2), pages 928-949, July.
    8. Eerola, Essi & Maattanen, Niku, 2004. "Strategic alliances, joint investments, and market structure," International Journal of Industrial Organization, Elsevier, vol. 22(2), pages 241-251, February.
    9. Larue, Bruno & Gervais, Jean-Philippe & Pouliot, Sebastien, 2007. "Should tariff-rate quotas mimic quotas?: Implications for trade liberalization under a supply management policy," The North American Journal of Economics and Finance, Elsevier, vol. 18(3), pages 247-261, December.
    10. repec:ebl:ecbull:v:30:y:2010:i:1:p:429-436 is not listed on IDEAS
    11. Thomas Rønde, 2001. "Trade Secrets and Information Sharing," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(3), pages 391-417, September.
    12. Jehiel, Phillipe & Moldovanu, Benny, 2001. "The European UMTS/IMT-2000 License Auctions," Sonderforschungsbereich 504 Publications 01-20, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    13. Das Varma, Gopal, 2003. "Bidding for a process innovation under alternative modes of competition," International Journal of Industrial Organization, Elsevier, vol. 21(1), pages 15-37, January.
    14. Bruno Larue & Sébastien Pouliot & Mohamed Jeddy, 2016. "On the Number and Heterogeneity of Bidders in Livestock Auctions," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 64(2), pages 289-310, June.
    15. Jeddy, Mohamed & Larue, Bruno, 2012. "Mergers, concurrent marketing mechanisms and the performance of sequential auctions," Working Papers 126945, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
    16. Sébastien Pouliot & Bruno Larue, 2012. "Import sensitive products and perverse tariff-rate quota liberalization," Canadian Journal of Economics, Canadian Economics Association, vol. 45(3), pages 903-924, August.
    17. Mohamed Jeddy & Bruno Larue & Jean-philippe Gervais, 2010. "Allocations and Price Trends in Sequential Auctions under Complete Information with Symmetric Bidders," Economics Bulletin, AccessEcon, vol. 30(1), pages 429-436.
    18. Amir Ban & Ron Lavi, 2021. "Option values in sequential auctions with time-varying valuations," International Journal of Game Theory, Springer;Game Theory Society, vol. 50(1), pages 75-104, March.

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