The Effect of Bidders' Asymmetries on Expected Revenues

Estelle Cantillon

No 2675, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Bidders' asymmetries are widespread in auction markets. Yet, their impact on behaviour and, ultimately, revenue and profits is still not well understood. In this Paper, I define a natural benchmark auction environment to compare any private value auction with asymmetrically distributed valuations. I show that the expected revenue from the benchmark auction always dominates that from the asymmetric auction, both in the first price auction and the second price auction. These results formalize and make transparent the idea that competition is reduced by bidders' asymmetries. The paper also contributes to a better understanding of competition and the nature of rents in auction markets. Anonymity of the allocation mechanism seems to be an important factor.

Keywords: Auctions; Asymmetries; Anonymous mechanisms; Benchmark; Reduced competition (search for similar items in EconPapers)
JEL-codes: D43 D44 L13 (search for similar items in EconPapers)
Date: 2001-01
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://cepr.org/publications/DP2675 (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:cpr:ceprdp:2675

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP2675

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().