Scale economies and the dynamics of recurring auctions
We analyze the dynamics of a game of sequential bidding in the presence of stochastic scale effects in the form of stochastic economies or diseconomies of scale. We show that economies give rise to declining expected equilibrium prices, whereas the converse is not generally true. Moreover, first- and second-price auctions are not always revenue equivalent. Indeed, economies of scale make the second-price format more profitable for the seller, whereas revenue equivalence holds in the case of diseconomies.
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- Ashenfelter, Orley, 1989. "How Auctions Work for Wine and Art," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 23-36, Summer.
- von der Fehr, N.-H. M. & Riis, C., 1998. "Option Values in Sequential Markets," Memorandum 07/1998, Oslo University, Department of Economics.
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"A Note on Sequential Auctions,"
829, California Institute of Technology, Division of the Humanities and Social Sciences.
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- Engelbrecht-Wiggans, Richard, 1994. "Sequential auctions of stochastically equivalent objects," Economics Letters, Elsevier, vol. 44(1-2), pages 87-90.
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