Imperfect Competition in Auction Designs

Roberto Burguet and József Sákovics

International Economic Review, 1999, vol. 40, issue 1, 231-47

Abstract: We study the competition between two owners of identical goods who wish to sell them to a pool of potential buyers. The sellers compete simultaneously setting reserve prices for their second price sealed bid auctions. Upon observing the set reserve prices, the buyers decide simultaneously in which auction to bid. We show that this game has (at least) one equilibrium and that all equilibria are inefficient: reserve prices are not driven to zero (cost). We also discuss where and why the parallel between optimal auction design and optimal pricing in the case of monopoly breaks down for oligopoly. Copyright 1999 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1999
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