Licensed to Deal: Auction Design for Market Creation in a Low-Income Country

Andrew Dillon and Nicolo Tomaselli

Working Papers - Economics from Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa

Abstract: We study the design of auctions in a low-income country where business licenses for new markets are auctioned to private firms. The field experiment varies two auction design choices: the auction mechanism and the type of information provided to bidders. The results suggest that: i) open auctions, in which bidders implicitly share information with their peers, have up to 61 percent lower mean bid prices and up to 67 percent lower bid variance than closed auctions, in which bidders bid secretly; ii) bidding behavior is influenced by the pre-bid license information provided by the auctioneer as much as by bidders’ ex-ante beliefs; and iii) auctions with real stakes reduce bids by a factor of five relative to non-incentivized auctions. These results underscore the importance of auction design for pricing innovations and the challenges inherent in creating markets in low-income countries where returns to innovations are highly uncertain.

Keywords: Auctions; Asymmetric and Private Information, Mechanism Design, Micro Analysis of Farm Firms, Farm Input Markets (search for similar items in EconPapers)
JEL-codes: D44 D82 Q12 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2025
New Economics Papers: this item is included in nep-des, nep-exp and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.disei.unifi.it/upload/sub/pubblicazioni/repec/pdf/wp03_2025.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:frz:wpaper:wp2025_03.rdf

Access Statistics for this paper

More papers in Working Papers - Economics from Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa Via delle Pandette 9 50127 - Firenze - Italy. Contact information at EDIRC.
Bibliographic data for series maintained by Giorgio Ricchiuti ().