The buyer's option in multi-unit ascending auctions : the case of wine auctions at Drouot
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.
|Date of creation:||Jun 2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 331 43136364
Fax: 331 43136362
Web page: http://www.inra.fr/Internet/Departements/ESR/UR/lea/index.html
When requesting a correction, please mention this item's handle: RePEc:lea:leawpi:0409. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Madeleine Roux)The email address of this maintainer does not seem to be valid anymore. Please ask Madeleine Roux to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.