How to Win Twice at an Auction: On the Incidence of Commissions in Auction Markets

30 Pages Posted: 24 May 2005

See all articles by Victor A. Ginsburgh

Victor A. Ginsburgh

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE); Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES)

Patrick Legros

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); Northeastern University, department of economics; Centre for Economic Policy Research (CEPR)

Nicolas Sahuguet

HEC Montreal - Institute of Applied Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 2005

Abstract

We analyze the welfare consequences of an increase in the commissions charged by intermediaries in auction markets. We argue that while commissions are similar to taxes imposed on buyers and sellers, the question of incidence deserves a new treatment in auction markets. We show that an increase in commissions makes sellers worse off, but buyers may strictly gain. The results are therefore strikingly different from the standard result that all consumers weakly lose after a tax or a commission increase. Our results are useful for evaluating compensation in price fixing conspiracies; in particular they suggest that the method used to distribute compensations in the class action against auction houses Christie's and Sotheby's was misguided.

Keywords: Auctions, intermediation, commissions, welfare

JEL Classification: D44, L12, L40

Suggested Citation

Ginsburgh, Victor A. and Legros, Patrick and Sahuguet, Nicolas, How to Win Twice at an Auction: On the Incidence of Commissions in Auction Markets (January 2005). CEPR Discussion Paper No. 4876. Available at SSRN: https://ssrn.com/abstract=728436

Victor A. Ginsburgh

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
1348 Louvain-la-Neuve, 1348
Belgium
+32 2 650 3846 (Phone)
+32 2 650 4012 (Fax)

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium
+32 2 650 3839/4 (Phone)
+32 2 650 3595 (Fax)

Patrick Legros (Contact Author)

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium
+32 2 650 4219/3 (Phone)
+32 2 650 4475 (Fax)

Northeastern University, department of economics ( email )

301 Lake Hall
Boston, MA 02115
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Nicolas Sahuguet

HEC Montreal - Institute of Applied Economics ( email )

3000, ch. de la Côte-Ste-Catherine
Montréal, Quebec H3T 2A7
Canada

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