Scale Economies and the Dynamics of Recurring Auctions

Thomas D. Jeitschko () and Elmar Wolfstetter ()

Economic Inquiry, 2002, vol. 40, issue 3, pages 403-414

Abstract: We analyze the dynamics of a game of sequential bidding in the presence of stochastic scale effects, either economies or diseconomies of scale. We show that economies of scale 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. Economies of scale make second-price auctions more profitable for the seller, whereas revenue equivalence may be preserved in the case of diseconomies. Copyright 2002, Oxford University Press.

Date: 2002
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