 Demand Reduction and Preemptive Bidding in License AuctionsRandolph Sloof, Jacob Goeree and Theo Offerman No 394, 2004 Meeting Papers from Society for Economic Dynamics Abstract: Multi-license ascending auctions have been criticized because they allow bidders to reduce their demand and split the market at low prices. At the same time, it has been argued that the ascending auction is a suitable format for a seller who wants to exploit preemptive motives. Incumbent firms may bid above their use values in a coordinated attempt to keep the weak entrant(s) out of the market. This process may boost revenue. In this paper, we look at environments where demand reduction and preemptive bidding are both supported as equilibrium of the ascending auction. In a series of experiments, we compare the performance of the ascending auction with the first-price auction. We observe many instances of strategic demand reduction in the ascending auction, even when entry by the newcomer leads to strong negative effects for the incumbents. As a result, the ascending auction is outperformed by the first-price auction, both in terms of revenue and in terms of efficiency. Keywords: auctions; demand reduction; preemptive bidding; experiment (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:red:sed004:394 Access Statistics for this paper More papers in 2004 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC. |
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