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When Should Sellers Use Auctions?

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  • James W. Roberts
  • Andrew Sweeting

Abstract

A bidding process can be organized so that offers are submitted simultaneously or sequentially. In the latter case, potential buyers can condition their behavior on previous entrants' decisions. The relative performance of these mechanisms is investigated when entry is costly and selective, meaning that potential buyers with higher values are more likely to participate. A simple sequential mechanism can give both buyers and sellers significantly higher payoffs than the commonly used simultaneous bid auction. The findings are illustrated with parameters estimated from simultaneous entry USFS timber auctions where our estimates predict that the sequential mechanism would increase revenue and efficiency.

Suggested Citation

  • James W. Roberts & Andrew Sweeting, 2011. "When Should Sellers Use Auctions?," NBER Working Papers 17624, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:17624
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    References listed on IDEAS

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    1. Paarsch, Harry J., 1997. "Deriving an estimate of the optimal reserve price: An application to British Columbian timber sales," Journal of Econometrics, Elsevier, vol. 78(2), pages 333-357, June.
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    Citations

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    Cited by:

    1. Lester, Benjamin & Visschers, Ludo & Wolthoff, Ronald, 2015. "Dynamic Relational Contracts under Complete Information," SIRE Discussion Papers 2015-51, Scottish Institute for Research in Economics (SIRE).
    2. Sweeting, Andrew & Bhattacharya, Vivek, 2015. "Selective entry and auction design," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 189-207.
    3. Laurent Lamy & Philippe Jehiel, 2016. "On the benefits of set-asides," Post-Print hal-01688237, HAL.
    4. Antoniades, Adonis & Calomiris, Charles W. & Hitscherich, Donna M., 2016. "No free shop: Why target companies sometimes choose not to buy ‘go-shop’ options," Journal of Economics and Business, Elsevier, vol. 88(C), pages 36-64.
    5. repec:eee:gamebe:v:105:y:2017:i:c:p:104-111 is not listed on IDEAS
    6. Lester, Benjamin & Visschers, Ludo & Wolthoff, Ronald, 2017. "Competing with asking prices," Theoretical Economics, Econometric Society, vol. 12(2), May.
    7. James W. Roberts, 2013. "Unobserved heterogeneity and reserve prices in auctions," RAND Journal of Economics, RAND Corporation, vol. 44(4), pages 712-732, December.
    8. Robert Kleinberg & Bo Waggoner & E. Glen Weyl, 2016. "Descending Price Optimally Coordinates Search," Papers 1603.07682, arXiv.org, revised Dec 2016.
    9. Jehiel, Philippe & Lamy, Laurent, 2014. "On discrimination in procurement auctions," CEPR Discussion Papers 9790, C.E.P.R. Discussion Papers.
    10. Ronald Wolthoff & Lodewijk Visschers & Benjamin Lester, 2012. "Asking Prices and Inspection Goods," 2012 Meeting Papers 792, Society for Economic Dynamics.
    11. Caleb Stroup & Matthew L. Gentry, 2017. "Entry and Competition in Takeover Auctions," Working Papers 17-01, Davidson College, Department of Economics.
    12. Lester, Benjamin & Visschers, Ludo & Wolthoff, Ronald, 2015. "Dynamic Relational Contracts under Complete Information," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 2015-51, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    13. Ma, Jun & Marmer, Vadim & Shneyerov, Artyom, 2016. "Inference for First-Price Auctions with Guerre, Perrigne, and Vuong's estimator," Microeconomics.ca working papers vadim_marmer-2016-4, Vancouver School of Economics, revised 17 Mar 2018.
    14. Robert Clark & decio Coviello & Jean-Francois Gauthier & Art Shneyerov, 2018. "Bid rigging and entry deterrence in public procurement: Evidence from an investigation into collusion and corruption in Quebec," Working Papers 1401, Queen's University, Department of Economics.

    More about this item

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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