Template-Type: ReDIF-Paper 1.0 Series: Tinbergen Institute Discussion Papers Creation-Date: 2004-11-16 Number: 04-122/1 Author-Name: Jacob Goeree Author-Email: email@example.com Author-Workplace-Name: California Institute of Technology, USA, and Universiteit van Amsterdam Author-Name: Theo Offerman Author-Email: firstname.lastname@example.org Author-Workplace-Name: Faculty of Economics and Econometrics, Universiteit van Amsterdam Author-Name: Randolph Sloof Author-Email: email@example.com Author-Workplace-Name: Faculty of Economics and Econometrics, Universiteit van Amsterdam Title: Demand Reduction and Preemptive Bidding in Multi-Unit License Auctions Abstract: This discussion paper resulted in a publication in Experimental Economics 2013, 16(1), 52-87.
Multi-unit ascending auctions allow for equilibria in which bidders strategically reduce their demand and split the market at low prices. At the same time, they allow for preemptive bidding by incumbent bidders in a coordinated attempt to exclude entrants from the market. We consider an environment where both demand reduction and preemptive bidding are supported as equilibrium phenomena of the ascending auction. In a series of experiments, we compare its performance to that of the discriminatory auction. Strategic demand reduction is quite prevalent in the ascending auction even when entry by the newcomer imposes a (large) negative externality on incumbents. As a result, the ascending auction performs worse than the discriminatory auction both in terms of revenue and efficiency, while the two auction formats offer similar chances for newcomers to enter the market. Classification-JEL: D44; D45; C91 Keywords: Multi-license auctions; demand reduction; external effects; preemption File-Url: http://papers.tinbergen.nl/04122.pdf File-Format: application/pdf File-Size: 347128 bytes Handle: RePEc:tin:wpaper:20040122