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- Title
Auctions with Financial Externalities.
- Authors
Maasland, Emiel; Onderstal, Sander
- Abstract
We study auctions with financial externalities, i.e., auctions in which losers care about how much the winner pays. In the first-price auction, larger financial externalities result in a lower expected price; in the second-price auction, the effect is ambiguous. Although the expected price in the second-price auction may increase if financial externalities increase, the seller is not able to gain more revenue by guaranteeing the losers a fraction of the auction revenue. With a reserve price, we find that both auctions may have pooling at the reserve price. This finding suggests that identical bids need not be a signal of collusion, in contrast to what is sometimes argued in anti-trust cases.
- Subjects
AUCTIONS; EXTERNALITIES; BIDDERS; COST; REVENUE accounting; RESERVES (Accounting); ANTITRUST law; ECONOMICS
- Publication
Economic Theory, 2007, Vol 32, Issue 3, p551
- ISSN
0938-2259
- Publication type
Article
- DOI
10.1007/s00199-006-0119-1