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Complements and Substitutes in Sequential Auctions: The Case of Water Auctions

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  • Donna, Javier
  • Espin-Sanchez, Jose

Abstract

We use data on sequential water auctions to estimate demand when units are complements or substitutes. A sequential English auction model determines the estimating structural equations. When units are complements, one bidder wins all units by paying a high price for the first unit, thus deterring others from bidding on subsequent units. When units are substitutes, different bidders win the units with positive probability, paying prices similar in magnitude. We recover individual demand consistent with this stark pattern of outcomes and confirm it is not collusive but consistent with noncooperative behavior. Demand estimates are biased if one ignores these features.

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  • Donna, Javier & Espin-Sanchez, Jose, 2018. "Complements and Substitutes in Sequential Auctions: The Case of Water Auctions," MPRA Paper 90052, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:90052
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    Cited by:

    1. Jaworski, Taylor, 2020. "Specification and structure in economic history," Explorations in Economic History, Elsevier, vol. 77(C).
    2. Donna, Javier & Espin-Sanchez, Jose, 2014. "Complements and Substitutes in Sequential Auctions: The Case of Water Auctions," MPRA Paper 55079, University Library of Munich, Germany.
    3. Donna, Javier & Espin-Sanchez, Jose, 2014. "The Illiquidity of Water Markets," MPRA Paper 55078, University Library of Munich, Germany.
    4. Corazzini, Luca & Galavotti, Stefano & Valbonesi, Paola, 2019. "An experimental study on sequential auctions with privately known capacities," Games and Economic Behavior, Elsevier, vol. 117(C), pages 289-315.
    5. Donna, Javier & Espin Sanchez, Jose, 2014. "Let the Punishment Fit the Criminal," MPRA Paper 67003, University Library of Munich, Germany.

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    More about this item

    Keywords

    Auctions; Structural Demand Estimation; Market Structure; Competition; Collusion;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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