Bidding Markets with Financial Constraints

Pablo Beker and Angel Hernando-Veciana ()

No 270532, Economic Research Papers from University of Warwick - Department of Economics

Abstract: We develop a model of bidding markets with financial constraints a la Che and Gale (1998b) in which two firms optimally choose their budgets. First, we provide an alternative explanation for the dispersion of markups and “money left on the table” across procurement auctions. Interestingly, this explanation does not hinge on significant private information but on differences, both endogenous and exogenous, in the availability of financial resources. Second, we explain why the empirical analysis of the size of markups may be biased downwards or upwards with a bias positively correlated with the availability of financial resources when the researcher assumes that the data are generated by the standard auction model. Third, we show that large concentration and persistent asymmetries in market shares together with occasional leadership reversals can arise as a consequence of the firms internal financial decisions even in the absence of exogenous shocks.

Keywords: Financial Economics; Marketing (search for similar items in EconPapers)
Pages: 43
Date: 2013-01-24
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/270532/files/twerp_1017_beker.pdf (application/pdf)
https://ageconsearch.umn.edu/record/270532/files/t ... r.pdf?subformat=pdfa (application/pdf)

Related works:
Working Paper: Bidding Markets with Financial Constraints (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:uwarer:270532

DOI: 10.22004/ag.econ.270532

Access Statistics for this paper

More papers in Economic Research Papers from University of Warwick - Department of Economics
Bibliographic data for series maintained by AgEcon Search ().