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Does a Seller Really Want Another Bidder?

Several papers compare auctioning heterogeneous assets sequentially with sequentially selling the right to choose among assets not yet taken. Typically motivated by auctions of condos for owner occupation, these papers have assumed that each winning bidder exits, so each successive auction has less competition. In many heterogeneous-asset-sale situations, a winning bidder may still be interested in acquiring further assets. We build a simple model of persistent competition, in which the distribution of equilibrium revenue from separate sales is shown to be a mean-preserving spread of the distribution of revenue from selling rights to choose. Persistent competition reveals that a high bidder does not always select his most preferred asset, and that one asset being slightly more likely to be a favored asset discontinuously affects equilibrium bidding.

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File URL: http://economics.missouri.edu/working-papers/2009/WP0909_harstad.pdf
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Paper provided by Department of Economics, University of Missouri in its series Working Papers with number 0909.

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Length: 12 pgs.
Date of creation: 15 Jun 2009
Date of revision:
Handle: RePEc:umc:wpaper:0909
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Web page: http://economics.missouri.edu/

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  1. Maskin, Eric & Riley, John, 2000. "Equilibrium in Sealed High Bid Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 439-54, July.
  2. Jacob K. Goeree & Charles R. Plott & John Wooders, 2004. "Bidders' Choice Auctions: Raising Revenues Through the Right to Choose," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 504-515, 04/05.
  3. Harstad, Ronald M, 1990. "Alternative Common-Value Auction Procedures: Revenue Comparisons with Free Entry," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 421-29, April.
  4. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June.
  5. Gale Ian L. & Hausch Donald B., 1994. "Bottom-Fishing and Declining Prices in Sequential Auctions," Games and Economic Behavior, Elsevier, vol. 7(3), pages 318-331, November.
  6. Douglas K. Reece, 1978. "Competitive Bidding for Offshore Petroleum Leases," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 369-384, Autumn.
  7. James Cox & Sam Dinkin & James Swarthout, 2001. "Endogenous Entry and Exit in Common Value Auctions," Experimental Economics, Springer, vol. 4(2), pages 163-181, October.
  8. Ashenfelter, O. & Genesove, D., 1992. "Testing for Price Anomalies in Real Estate Auctions," Working papers 92-2, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Klemperer, Paul, 2000. "What Really Matters in Auction Design," CEPR Discussion Papers 2581, C.E.P.R. Discussion Papers.
  10. Laffont, Jean-Jacques, 1997. "Game theory and empirical economics: The case of auction data 1," European Economic Review, Elsevier, vol. 41(1), pages 1-35, January.
  11. French, Kenneth R & McCormick, Robert E, 1984. "Sealed Bids, Sunk Costs, and the Process of Competition," The Journal of Business, University of Chicago Press, vol. 57(4), pages 417-41, October.
  12. Harris, Milton & Raviv, Artur, 1981. "Allocation Mechanisms and the Design of Auctions," Econometrica, Econometric Society, vol. 49(6), pages 1477-99, November.
  13. Burguet, Roberto, 2007. "Right to choose in oral auctions," Economics Letters, Elsevier, vol. 95(2), pages 167-173, May.
  14. Dirk Bergemann & Juuso Valimaki, 2002. "Information Acquisition and Efficient Mechanism Design," Econometrica, Econometric Society, vol. 70(3), pages 1007-1033, May.
  15. Hausch, Donald B & Li, Lode, 1993. "A Common Value Auction Model with Endogenous Entry and Information Acquisition," Economic Theory, Springer, vol. 3(2), pages 315-34, April.
  16. repec:att:wimass:9215 is not listed on IDEAS
  17. Ronald M Harstad, 2011. "Endogenous Competition Alters the Structure of Optimal Auctions," ISER Discussion Paper 0816, Institute of Social and Economic Research, Osaka University.
  18. Gaver, Kenneth M & Zimmerman, Jerold L, 1977. "An Analysis of Competitive Bidding on BART Contracts," The Journal of Business, University of Chicago Press, vol. 50(3), pages 279-95, July.
  19. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
  20. Milgrom, Paul R, 1981. "Rational Expectations, Information Acquisition, and Competitive Bidding," Econometrica, Econometric Society, vol. 49(4), pages 921-43, June.
  21. Riley, John G & Samuelson, William F, 1981. "Optimal Auctions," American Economic Review, American Economic Association, vol. 71(3), pages 381-92, June.
  22. Crémer, Jacques & Spiegel, Yossi & Zheng, Charles Zhoucheng, 2007. "Auctions with Costly Information Acquisition," Staff General Research Papers 12709, Iowa State University, Department of Economics.
  23. Bergemann, Dirk & Pesendorfer, Martin, 2001. "Information Structures in Optimal Auctions," CEPR Discussion Papers 2991, C.E.P.R. Discussion Papers.
  24. Porter, Robert H, 1995. "The Role of Information in U.S. Offshore Oil and Gas Lease Auctions," Econometrica, Econometric Society, vol. 63(1), pages 1-27, January.
  25. McAfee, R Preston, 1993. "Mechanism Design by Competing Sellers," Econometrica, Econometric Society, vol. 61(6), pages 1281-1312, November.
  26. Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, vol. 86(1), pages 180-94, March.
  27. Samuelson, William F., 1985. "Competitive bidding with entry costs," Economics Letters, Elsevier, vol. 17(1-2), pages 53-57.
  28. Roberto Burguet, 2003. "The Condominium Problem; Auctions for Substitutes," Working Papers 63, Barcelona Graduate School of Economics.
  29. Ronald M. Harstad & Michael H. Rothkopf, 2000. "An "Alternating Recognition" Model of English Auctions," Management Science, INFORMS, vol. 46(1), pages 1-12, January.
  30. Harstad, Ronald M. & Pekec, Aleksandar Sasa & Tsetlin, Ilia, 2008. "Information aggregation in auctions with an unknown number of bidders," Games and Economic Behavior, Elsevier, vol. 62(2), pages 476-508, March.
  31. Michael H. Rothkopf, 1969. "A Model of Rational Competitive Bidding," Management Science, INFORMS, vol. 15(7), pages 362-373, March.
  32. Eliaz, Kfir & Offerman, Theo & Schotter, Andrew, 2008. "Creating competition out of thin air: An experimental study of right-to-choose auctions," Games and Economic Behavior, Elsevier, vol. 62(2), pages 383-416, March.
  33. Wilson, Robert, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 511-18, October.
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