Auctions with bid credits and resale

Simon Loertscher and Leslie Marx

International Journal of Industrial Organization, 2017, vol. 55, issue C, 58-90

Abstract: Bid credits favoring subsets of bidders are routinely imposed on auctions and procurement auctions. These bid credits result in inefficient auction outcomes, which create pressure for post-auction resale or, in a procurement context, for subcontracting. We show that the presence of resale, in turn, affects bidding strategies in such a way that auction outcomes are more likely to be inefficient and less informative, making it harder for resale to correct inefficiencies. The negative effects of bid credits and resale can be mitigated through direct restrictions on resale, tight caps on credits, reserve prices, anonymous bidding, and enhanced competition.

Keywords: Bid preference; Designated entity; Spectrum license (search for similar items in EconPapers)
JEL-codes: C72 D44 L13 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:55:y:2017:i:c:p:58-90

DOI: 10.1016/j.ijindorg.2017.09.002

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