How to Win Twice at an Auction: On the Incidence of Commissions in Auction Markets

Victor A. Ginsburgh (), Patrick Legros and Nicolas Sahuguet ()

No 4876, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We analyse the welfare consequences of an increase in the commissions charged by intermediaries in auction markets. We argue that while commissions are similar to taxes imposed on buyers and sellers the question of incidence deserves a new treatment in auction markets. We show that an increase in commissions makes sellers worse off, but buyers may strictly gain. The results are therefore strikingly different from the standard result that all consumers weakly lose after a tax or a commission increase. Our results are useful for evaluating compensation in price fixing conspiracies; in particular they suggest that the method used to distribute compensations in the class action against auction houses Christie’s and Sotheby’s was misguided.

Keywords: auctions; commissions; intermediation; welfare (search for similar items in EconPapers)
JEL-codes: D44 L12 L40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cul and nep-fmk
Date: 2005-01
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Working Paper: How to Win Twice at an Auction. On the Incidence of Commissions in Auction Markets (2004)
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