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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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  1. Harris, Milton & Raviv, Artur, 1981. "Allocation Mechanisms and the Design of Auctions," Econometrica, Econometric Society, vol. 49(6), pages 1477-99, November.
  2. Ronald M. Harstad & Michael H. Rothkopf, 2000. "An "Alternating Recognition" Model of English Auctions," Management Science, INFORMS, vol. 46(1), pages 1-12, January.
  3. Jacques Crémer & Yossi Spiegel & Charles Zheng, 2009. "Auctions with costly information acquisition," Economic Theory, Springer, vol. 38(1), pages 41-72, January.
  4. Dirk Bergemann & Martin Pesendorfer, 2001. "Information Structures in Optimal Auctions," Cowles Foundation Discussion Papers 1323, Cowles Foundation for Research in Economics, Yale University.
  5. repec:att:wimass:9215 is not listed on IDEAS
  6. Laffont, J.J., 1996. "Game Theory and Empirical Economics: The Case of Auction Data," Papers 95.394, Toulouse - GREMAQ.
  7. Riley, John G & Samuelson, William F, 1981. "Optimal Auctions," American Economic Review, American Economic Association, vol. 71(3), pages 381-92, June.
  8. Dirk Bergemann & Juuso Vaimaki, 2000. "Information Acquisition and Efficient Mechanism Design," Cowles Foundation Discussion Papers 1248, Cowles Foundation for Research in Economics, Yale University.
  9. Professor Paul Klemperer, 2000. "What Really Matters in Auction Design," Microeconomics 0004008, EconWPA.
  10. Robert H. Porter, 1992. "The Role of Information in U.S. Offshore Oil and Gas Lease Auctions," NBER Working Papers 4185, National Bureau of Economic Research, Inc.
  11. 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.
  12. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  13. 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.
  14. McAfee, R Preston, 1993. "Mechanism Design by Competing Sellers," Econometrica, Econometric Society, vol. 61(6), pages 1281-1312, November.
  15. 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.
  16. Ronald M Harstad, 2011. "Endogenous Competition Alters the Structure of Optimal Auctions," ISER Discussion Paper 0816, Institute of Social and Economic Research, Osaka University.
  17. Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, vol. 86(1), pages 180-94, March.
  18. Roberto Burguet, 2005. "The condominium problem; auctions for substitutes," Review of Economic Design, Springer, vol. 9(2), pages 73-90, 04.
  19. Ronald M. Harstad & Aleksandar Pekec & Ilia Tsetlin, 2005. "Information Aggregation in Auctions with an Unknown Number of Bidders," Working Papers 0605, Department of Economics, University of Missouri.
  20. Goeree, Jacob & Plott, Charles & Wooders, John, 2003. "Bidders' choice auctions: Raising revenues through the right to choose," Working Papers 1181, California Institute of Technology, Division of the Humanities and Social Sciences.
  21. Maskin, Eric & Riley, John, 2000. "Equilibrium in Sealed High Bid Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 439-54, July.
  22. Michael H. Rothkopf, 1969. "A Model of Rational Competitive Bidding," Management Science, INFORMS, vol. 15(7), pages 362-373, March.
  23. 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.
  24. Wilson, Robert, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 511-18, October.
  25. 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.
  26. 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.
  27. Milgrom, Paul R, 1981. "Rational Expectations, Information Acquisition, and Competitive Bidding," Econometrica, Econometric Society, vol. 49(4), pages 921-43, June.
  28. Samuelson, William F., 1985. "Competitive bidding with entry costs," Economics Letters, Elsevier, vol. 17(1-2), pages 53-57.
  29. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June.
  30. Douglas K. Reece, 1978. "Competitive Bidding for Offshore Petroleum Leases," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 369-384, Autumn.
  31. 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.
  32. 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.
  33. Burguet, Roberto, 2007. "Right to choose in oral auctions," Economics Letters, Elsevier, vol. 95(2), pages 167-173, May.
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