Scale Economies and the Dynamics of Recurring Auctions

Economic Inquiry, 40: 403-414 (2002)

17 Pages Posted: 29 Oct 1998 Last revised: 31 Oct 2017

See all articles by Elmar Wolfstetter

Elmar Wolfstetter

Humboldt University of Berlin - Faculty of Economics; Korea University - College of Economics and Commerce; CESifo (Center for Economic Studies and Ifo Institute)

Thomas D. Jeitschko

Michigan State University - Department of Economics

Date Written: July 1, 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.

JEL Classification: D44

Suggested Citation

Wolfstetter, Elmar G. and Jeitschko, Thomas D., Scale Economies and the Dynamics of Recurring Auctions (July 1, 1998). Economic Inquiry, 40: 403-414 (2002), Available at SSRN: https://ssrn.com/abstract=130188 or http://dx.doi.org/10.2139/ssrn.130188

Elmar G. Wolfstetter

Humboldt University of Berlin - Faculty of Economics ( email )

Institut für Wirtschaftstheorie I
Spandauer Strasse 1
Berlin
Germany
+49 30 2093 5652/3 (Phone)
+49 30 2093 5619 (Fax)

HOME PAGE: http://www2.hu-berlin.de/wt1wo/staff/wolfstetter/index.html

Korea University - College of Economics and Commerce ( email )

Anam-dong, Sungbuk-Ku
Seoul, 136-701
Korea

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Thomas D. Jeitschko (Contact Author)

Michigan State University - Department of Economics ( email )

110 Marshall-Adams Hall
East Lansing, MI 48824
United States
517-355-8302 (Phone)
517-432-1068 (Fax)

HOME PAGE: http://www.msu.edu/~jeitschk/

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