When are Auctions Best?

40 Pages Posted: 19 Jul 2007

See all articles by Jeremy Bulow

Jeremy Bulow

Stanford University; National Bureau of Economic Research (NBER)

Paul Klemperer

University of Oxford - Department of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: June 2007

Abstract

We compare the two most common bidding processes for selling a company or other asset when participation is costly to buyers. In an auction all entry decisions are made prior to any bidding. In a sequential bidding process earlier entrants can make bids before later entrants choose whether to compete. The sequential process is more efficient because entrants base their decisions on superior information. But pre-emptive bids transfer surplus from the seller to buyers. Because the auction is more conducive to entry in several ways it usually generates higher expected revenue.

Keywords: Auctions, jump bidding, sequential sales, procurement, entry

JEL Classification: D44, G34, L13

Suggested Citation

Bulow, Jeremy I. and Klemperer, Paul, When are Auctions Best? (June 2007). Stanford University Graduate School of Business Research Paper No. 1973. Available at SSRN: https://ssrn.com/abstract=999904 or http://dx.doi.org/10.2139/ssrn.999904

Jeremy I. Bulow

Stanford University ( email )

Room L 237
Stanford, CA 94305-5015
United States
650-723-2160 (Phone)
650-725-0468 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Paul Klemperer (Contact Author)

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom
+44 1865 278 588 (Phone)
+44 1865 278 557 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
216
Abstract Views
980
rank
127,897
PlumX Metrics