Auction with aftermarket for budget constrained bidders
The paper compares different auction formats for sale of a single patented innovation for budget constrained bidders. This unit decreases the marginal cost of production in the aftermarket for its owner by an amount which depends on the money invested on the development of this technology. As the bidders have a fixed budget that must be used to pay the final auction price and also to develop the new technology, the winner has incentives to pay a low amount for his unit to increase the amount available to invest in cost reduction. Conversely the loser has incentives to induce induce a higher price to be paid by the winner in order to increase aftermarket profits. This conflict of interest generates the willingness to pay (WTP) for the patent through an endogenous process, which may end up by stablishing a higher WTP for the lowest financed firm. Given this background, the case in which the players have different initial budgets may generate multiple equilibria for all studied auction mechanisms. These equilibria produce di¤erent consumer surplus and, thus, a central government with an unti-trust behavior is able to choose the auction that generates the re�ned equilibrium leading to the highest consumer surplus.
|Date of creation:||24 Jul 2006|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Goeree, Jacob K., 2003. "Bidding for the future: signaling in auctions with an aftermarket," Journal of Economic Theory, Elsevier, vol. 108(2), pages 345-364, February.
- Pitchik, Carolyn, 2009.
"Budget-constrained sequential auctions with incomplete information,"
Games and Economic Behavior,
Elsevier, vol. 66(2), pages 928-949, July.
- Carolyn Pitchik, 1989. "Budget-Constrained Sequential Auctions With Incomplete Information," STICERD - Theoretical Economics Paper Series 201, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Carolyn Pitchik, 2008. "Budget-Constrained Sequential Auctions with Incomplete Information," Working Papers tecipa-342, University of Toronto, Department of Economics.
- Carolyn Pitchik, 2006. "Budget-Constrained Sequential Auctions with Incomplete Information," Working Papers tecipa-230, University of Toronto, Department of Economics.
- Roberto Burguet & R. McAfee, 2009. "License prices for financially constrained firms," Journal of Regulatory Economics, Springer, vol. 36(2), pages 178-198, October.
- Roberto Burguet & R. Preston McAfee, 2005. "License Prices for Financially Constrained Firms," Working Papers 224, Barcelona Graduate School of Economics.
- Roberto Burguet & R. Preston McAfee, 2008. "License Prices for Financially Constrained Firms," Working Papers 351, Barcelona Graduate School of Economics.
- Roberto Burguet & R. Preston McAfee, 2008. "License Prices for Financially Constrained Firms," UFAE and IAE Working Papers 745.08, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Carolyn Pitchik & Andrew Schotter, 1988. "Perfect Equilibria in Budget-Constrained Sequential Auctions: An Experimental Study," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 363-388, Autumn.
- Pitchik, Carolyn & Schotter, Andrew, 1986. "Perfect Equilibria in Budget Constrained Sequential Auctions: An Experimental Study," Working Papers 86-22, C.V. Starr Center for Applied Economics, New York University.
- Yeon-Koo Che & Ian Gale, 1998. "Standard Auctions with Financially Constrained Bidders," Review of Economic Studies, Oxford University Press, vol. 65(1), pages 1-21.
- Marco Pagnozzi, 2007. "Bidding to lose? Auctions with resale," RAND Journal of Economics, RAND Corporation, vol. 38(4), pages 1090-1112, December.
- Marco Pagnozzi, 2004. "Bidding to Lose? Auctions with Resale," CSEF Working Papers 116, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Nov 2006.
- Bergstrom, Theodore C. & Varian, Hal R., 1985. "Two remarks on Cournot equilibria," Economics Letters, Elsevier, vol. 19(1), pages 5-8.
- Bandulet Martin & Morasch Karl, 2003. "Incentives to Invest in Transport Cost Reduction - Conceptual Issues and an Application to Electronic Commerce," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-22, December.
- Roberto Burguet, 2000. "Auction theory: a guided tour," Investigaciones Economicas, Fundación SEPI, vol. 24(1), pages 3-50, January.
- Burguet, R., 1998. "Auction Theory: a Guided Tour," UFAE and IAE Working Papers 422.98, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Shapiro, Carl, 1989. "Theories of oligopoly behavior," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 6, pages 329-414 Elsevier.
- Schwartz, Marius, 1989. "Investments in Oligopoly: Welfare Effects and Tests for Predation," Oxford Economic Papers, Oxford University Press, vol. 41(4), pages 698-719, October. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:2134. 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: (Joachim Winter)
If references are entirely missing, you can add them using this form.