Scale Economies and the Dynamics of Recurring Auctions

17 Pages Posted: 29 Oct 1998  

Elmar Wolfstetter

Humboldt University of Berlin - Faculty of Economics; Korea University - College of Economics and Commerce

Thomas D. Jeitschko

Michigan State University - Department of Economics

Date Written: 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.

JEL Classification: D44

Suggested Citation

Wolfstetter, Elmar and Jeitschko, Thomas D., Scale Economies and the Dynamics of Recurring Auctions (July 1998). 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://www.wiwi.hu-berlin.de/wt1/

Korea University - College of Economics and Commerce ( email )

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

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/

Paper statistics

Downloads
456
Rank
49,618
Abstract Views
2,204