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Scale economies and the dynamics of recurring auctions

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  • Jeitschko, Thomas D.
  • Wolfstetter, Elmar

Abstract

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.

Suggested Citation

  • Jeitschko, Thomas D. & Wolfstetter, Elmar, 1998. "Scale economies and the dynamics of recurring auctions," SFB 373 Discussion Papers 1998,62, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    • Handle: RePEc:zbw:sfb373:199862
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    References listed on IDEAS

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    1. Jane Black & David de Meza, 1992. "Systematic Price Differences Between Successive Auctionsare no Anomaly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(4), pages 607-628, December.
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    More about this item

    Keywords

    auctions; procurements; sequential auctions; economies of scale;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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