Do Not Panic: How to Avoid Inefficient Rushes Using Multi-Stage Auctions

Angel Hernando-Veciana () and Fabio Michelucci

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

Abstract: We show that open ascending auctions are prone to inecient rushes, i.e. all bidders quitting at the same price, in market environments such as privatizations, takeover contests, and procurement auctions. Rushes arise when an incumbent with better information about a common value component of the asset for sale quits, and his exit reveals negative information. Rushes can be avoided, and expected social surplus maximized, by reducing the disclosure of information with the use of a multi-stage auction. Thus, our results point out to an important limitation of market mechanisms that provide immediate information disclosure to all agents in a market.

Keywords: efficiency; auctions; mechanism design; two stage mechanisms (search for similar items in EconPapers)
JEL-codes: D44 D82 (search for similar items in EconPapers)
Date: 2013-08
New Economics Papers: this item is included in nep-cta and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.cerge-ei.cz/pdf/wp/Wp489.pdf (application/pdf)

Related works:
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:cer:papers:wp489

Access Statistics for this paper

More papers in CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague Contact information at EDIRC.
Bibliographic data for series maintained by Lucie Vasiljevova ().