Flow auctions

Ilan Kremer (), Zvi Wiener and Eyal Winter ()
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Ilan Kremer: Stanford University

International Journal of Game Theory, 2017, vol. 46, issue 3, No 3, 655-665

Abstract: Abstract Flow goods (like electricity) are sold through auctions in a dynamic framework. An important design question is the frequency of such auctions. We use a simple dynamic auction model in continuous time to answer this question. We focus on the relationship between the persistency of bidders’ valuations and the optimal choice of frequency. If the seller focuses on the equilibrium in which bidders follow a repeated static Nash strategy, then the frequency of auctions should typically increase when persistency declines. However, accounting for the fact that bidders can follow different equilibria that are collusive in nature, the comparative statics are reversed, forcing the seller to reduce the frequency when bidders’ valuations are less persistent. The argument builds on the fact that high frequency auctions are more conducive to collusion among bidders.

Keywords: Auctions; Dynamics; Contracting; Nash equilibrium; Collusion (search for similar items in EconPapers)
JEL-codes: C72 D44 D86 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s00182-016-0549-3

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