Do Auctions Select Efficient Firms
Bibliographic Data
| ID | 9708413 |
|---|---|
| Authors | Marco Janssen (0000-0002-0965-2369, University of Vienna), Maarten C W Janssen (University of Vienna, Tinbergen Institute and Erasmus University Rotterdam), Vladimir A Karamychev (0000-0001-9123-3894, Erasmus University Rotterdam and Tinbergen Institute) |
| Year | 2010 |
| Volume | 120 |
| Issue | 549 |
| Pages | 1319-1344 |
| Publication date | 2010-12-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | The Economic Journal (JOURNAL) |
| Journal identifiers | ISSN: 0013-0133 • E-ISSN: 1468-0297 |
| Publisher | Oxford University Press (OUP) (PUBLISHER) |
| DOI | 10.1111/j.1468-0297.2009.02334.x |
| OpenAlex | W3122046206 |
| Language | EN |
| References cited | 19 |
This paper considers a government auctioning off multiple licenses to firms that compete in a market after the auction. Firms have different costs, and cost efficiency is private information at the auction stage and at the market competition stage. If only one license is auctioned, standard results say that the most efficient firm wins the auction (license) as it will get the highest profit in the aftermarket, i.e., it has the highest valuation for the license. This paper argues that this result does not generalize to the case of multiple licenses and aftermarket competition. In particular, we determine conditions under which auctions may select inefficient firms and therefore lead to an inefficient allocation of resources. Strategic interaction in the aftermarket, in particular the fact that firms prefer to compete with the least cost-efficient firms rather than with the most efficient firms, is responsible for this result
Business · Common value auction · Competition (biology · Eauction · Economics · Industrial organization · License · Microeconomics · Profit (economics · Reverse auction · Valuation (finance · Auction Theory and Applications · Computer Science · Economic Policies and Impacts · Finance · Merger and Competition Analysis
| Citation velocity | historical |
|---|---|
| Highly cited | No |