Auction Prices, Market Share, and a Common Agent
The Australian National University – Centre for Applied Macroeconomic Analysis Working Paper No. 24/2011
44 Pages Posted: 20 Jul 2011
Date Written: July 1, 2011
The primary pro-competitive justification for multiple principals to hire a common bidding agent is efficiency. The efficiency gained by doing so increases the advantage of the common bidding agent. Almost common value auction theory predicts that an advantaged bidder is able to reduce competition by credibly enhancing the ‘winner’s curse’ of disadvantaged rivals. The credible threat results in disadvantaged rivals exiting the bidding process early, leaving the advantaged bidder to purchase most, if not all, units at lower prices than when rivals have common values. The results of our empirical study of a common bidding agent are consistent with this theory.
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