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Industry Concentration in Common Value Auctions: Theory and Evidence


Vlad Mares


Washington University in Saint Louis - John M. Olin Business School

Mikhael Shor


University of Connecticut Department of Economics

December 1, 2006

Economic Theory, Vol. 35, No. 1, 2008, pp. 37-56

Abstract:     
We examine theoretically and experimentally two countervailing effects of industry concentration in common value auctions. Greater concentration of information among fewer bidders reduces competition but increases the precision of private estimates. We demonstrate that this generally leads to more aggressive bidding. However, the reduction in competition dominates the informational effects, resulting in lower prices. We examine these hypothesized effects experimentally by conducting a series of auctions with constant informational content but distributed among a varying number of bidders. The experimental results are consistent with our theoretical predictions.

Number of Pages in PDF File: 18

Keywords: common value auctions, information, joint bidding, industry concentration

JEL Classification: D44, L41, C92

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Date posted: May 10, 2006 ; Last revised: October 1, 2012

Suggested Citation

Mares, Vlad and Shor, Mikhael, Industry Concentration in Common Value Auctions: Theory and Evidence (December 1, 2006). Economic Theory, Vol. 35, No. 1, 2008, pp. 37-56. Available at SSRN: http://ssrn.com/abstract=901067 or http://dx.doi.org/10.2139/ssrn.901067

Contact Information

Vladimir N. Mares
Washington University in Saint Louis - John M. Olin Business School ( email )
One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-4934 (Phone)
Mikhael Shor (Contact Author)
University of Connecticut Department of Economics ( email )
341 Mansfield Road
Storrs, CT 06269
United States
HOME PAGE: http://www.mikeshor.com/
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