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

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

No 2004.146, Working Papers from Fondazione Eni Enrico Mattei

Abstract: We analyze the welfare consequences of an increase in the commissions charged by the organizer of an auction. Commissions are similar to taxes imposed on buyers and sellers and the economic problem that results looks similar to the question of tax incidence in consumer economics. We argue, however, that auction markets deserve a separate treatment. Indeed we show that an increase in commissions makes sellers worse off, but some (or all) buyers may gain. The results are therefore strikingly different from the standard result that all consumers lose after a tax or a commission increase. We apply our results to comment on the class action against Christie’s and Sotheby’s and argue that the method used to distribute compensations was misguided.

Keywords: Auction; Intermediation; Commissions; Welfare (search for similar items in EconPapers)
JEL-codes: D44 D80 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-gth and nep-mic
Date: 2004-12
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Related works:
Working Paper: How to Win Twice at an Auction: On the Incidence of Commissions in Auction Markets (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:fem:femwpa:2004.146

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