Competing Auctions with Endogenous Quantities

Benny Moldovanu, Aner Sela and Xianwen Shi

No 6151, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study models where two sellers simultaneously decide on their discrete supply of a homogenous good. There is a finite, not necessarily large, number of buyers who have unit demand and privately known valuations. In the first model, there is a centralized market place where a uniform auction takes place. In the second model, there are two distinct auction sites, each with one seller, and buyers decide where to bid. Our results shed some light on the conditions leading to either the emergence of dominant marketplaces or to the coexistence of several competing sites. Using the theory of potential games, we show that in the one-site auction model there is always an (almost symmetric) equilibrium in pure strategies. This equilibrium approximates the Cournot outcome as the number of buyers becomes large. In contrast, if the distribution of buyers values has an increasing failure rate, and if the marginal cost of production is relatively low, there is no pure strategy equilibrium where both sellers make positive profits in the competing sites model. We also identify conditions under which an equilibrium with a unique active site exists. Technically, we are able to deal with the finite and discrete models by using several results about order statistics developed by Richard Barlow and Frank Proschan (1965, 1966, 1975).

Keywords: Competing; auctions (search for similar items in EconPapers)
JEL-codes: D44 (search for similar items in EconPapers)
Date: 2007-03
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP6151 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Competing auctions with endogenous quantities (2008)
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:6151

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP6151

Access Statistics for this paper

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