A small volume reduction that melts down the market: Auctions with endogenous rationing

Karl-Martin Ehrhart, Ann-Katrin Hanke and Marion Ott

No 20-014, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: Auctions with endogenous rationing have been introduced to stimulate competition. Such (procurement) auctions reduce the volume put out to tender when competition is low. This paper finds a strong negative effect of endogenous rationing on participation when bid-preparation is costly, counteracting the aim to stimulate competition. For multiple auctioneer's objectives mentioned in directives, we derive optimal mechanisms, which differ due to different evaluation of the tradeoff between participation and bid-preparation costs. Thus, the auctioneer needs to decide on an objective. However, reducing bid-preparation costs improves the optimal values of multiple objective functions.

Keywords: auction; participation; market design; optimal mechanism; renewable energy support (search for similar items in EconPapers)
JEL-codes: D44 D47 D82 Q48 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-com, nep-des, nep-ene, nep-gth, nep-mic and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:20014

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