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Does a Seller Really Want Another Bidder?

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Abstract

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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  • Ronald M. Harstad, 2009. "Does a Seller Really Want Another Bidder?," Working Papers 0909, Department of Economics, University of Missouri.
  • Handle: RePEc:umc:wpaper:0909
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    1. Ronald M Harstad, 2011. "Endogenous Competition Alters the Structure of Optimal Auctions," ISER Discussion Paper 0816, Institute of Social and Economic Research, Osaka University.

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    More about this item

    Keywords

    auction theory; rights-to-choose auctions; revenue comparisons; persistent competition; private information;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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