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Scale Economies and the Dynamics of Recurring AuctionsElmar WolfstetterHumboldt University of Berlin - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Korea University - College of Economics and Commerce; World Bank Thomas D. JeitschkoMichigan State University - Department of Economics July 1998 Abstract: We analyze the dynamics of a game of sequential bidding in the presence of stochastic scale effects in the form of stochastic economies or diseconomies of scale. We show that economies give rise to declining expected equilibrium prices, whereas the converse is not generally true. Moreover, first- and second-price auctions are not always revenue equivalent. Indeed, economies of scale make the second-price format more profitable for the seller, whereas revenue equivalence is preserved in the case of diseconomies.
Number of Pages in PDF File: 17 JEL Classification: D44 working papers seriesDate posted: October 29, 1998Suggested CitationContact Information
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