The Effect of Profit Sharing on Auction Markets (original) (raw)
Related papers
How to Win Twice at an Auction. On the Incidence of Commissions in Auction Markets
SSRN Electronic Journal, 2000
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 o¤, but buyers may strictly gain. The results are therefore strikingly di¤erent 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 …xing 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.
An economic perspective on auctions
Economic Policy, 2003
The recent spectrum auctions in Europe have shown that serious problems can arise in auctions where multiple complementary objects are being sold (such as blocks of radio spectrum) that will subsequently be used by the winning bidders to compete against each other in downstream markets. Other important instances of such situations include takeoff and landing slots at airports and rights for electricity and gas transmission. We first review some of the theory describing multi-object auctions. We next outline the importance of strategic effects arising in auctions that are followed by competition between the bidders, and the tension arising between various goals such as efficiency and revenue maximization. Although more flexible auction formats can have virtues (particularly in taking into account complementarities), they can also be manipulated by bidders to build market power to the detriment of consumers. We next apply these insights to the recent European UMTS licence auctions. Finally we draw the main conclusions and policy implications.
Studies in Microeconomics
It gives me great pleasure to introduce the readers of this journal to the new book on economic analysis of various aspects of 'market quality' using the tools of 'oligopoly theory' and 'auction theory' by Krishnendu Ghosh Dastidar. The issues and problems dealt with in this book are motivated by real-life examples, mostly from emerging economies. The treatment is entirely theoretical, but possible directions of application are indicated. This book will be extremely useful for graduate students of economics and management sciences for starting a systematic inquiry into this area. Some open problems are discussed at the end of each chapter for further whetting the interest of the reader. In the following, I provide a chapter by chapter impression. Chapter 1 deals with the relevant background material. Oligopoly theory is introduced in the first section. A succinct survey of all the important developments in the discrete time setting is provided. The presentation is lucid, extremely readable and points to other important references in the area. The second section whets the appetite of the reader for auction theory. A nice discussion on the canonical assumptions such as risk neutrality, quasi-linearity of utility function, independent private information, etc., is provided. This section also outlines the consequences of departure from these assumptions. The third section introduces the latest ideas and development of the issue of market quality as part of the study of industrial organization. As mentioned by the author, this direction of enquiry is very new and, even among economists working in related areas, relatively few are cognizant of this body of work. This section acts a good taster of things to come. Chapter 2, titled 'Allocation of Scarce Resources' deals with action theory in general. The first section acts as a very good trailer for the theory to come and also relates it to real-life problems (wireless spectrum or coal block allocations). It would intrigue someone new to this area to study auction theory with greater interest. The theoretical underpinnings and summary of conclusions are informative. The remainder of the chapter deals with the theoretical model. The analysis is presented formally and in detail, useful for students aiming to pursue this line of research in future. The effects of corruption and incompetence on quality is the subject matter of Chapter 3. The illustrations and highlighting the importance of quality has been done nicely in the first section. The data and the studies cited are quite impactful. The summary of the findings discussed in the remainder of the chapter connects Studies in Microeconomics 6(1-2) 130-132
Auctions and Regulation: Reengineering of Regulatory Mechanisms**
2000
The FCC auctions, beginning in July 1994, were a watershed event in what may be best called reengineering regulation. It was the ®rst time a new market mechanism, in the form of an auction, had been developed especially to replace traditional administrative procedures for regulating access to a natural resource. The spectrum auctions, and the soon to follow trading in SO 2 emission rights were the two initial instances in which game theory, and more speci®cally auction theory, played an essential role in the design of an market-based allocation process. The FCC developed a novel auction format for the spectrum auctions. The replacing of administrative regulatory processes with market mechanisms is a major innovation in regulation, or perhaps more accurately, deregulation.
Auction Theory: A Guide to the Literature
SSRN Electronic Journal, 1999
This paper provides an elementary, non-technical, survey of auction theory, by introducing and describing some of the critical papers in the subject.
Auctions in Theory and Practice
International Series in Operations Research & Management Science, 2000
In many policy contexts, efficiency is the primary consideration in structuring auctions. In this paper, we survey several sources of inef-Þciency arising in auctions. We Þrst highlight the effects of demand reducing incentives, both in theory and in practice, in multi-unit auctions. Next, we study inefficiencies arising from interdependence in bidder valuations. Again, we highlight both theoretical insights as well as how these translate in practice. Finally, we present an impossibility theorem for attaining efficiency in sufficiently rich auction contexts. An auction form suggested by Klemperer is discussed as a means of ameliorating inefficiencies arising in practice. JEL ClassiÞcation Nos. D44, D82 Keywords: Auctions, Efficiency * Updated copies of this paper can be found at www.wws.princeton.edu/\~rjmorgan. † This paper was prepared for the conference, Central Bank Operations: Theory and Evidence. This conference was organized by the Center for European Integration Studies with the support of Bank of Spain, Deutsche Bundesbank, and European Central Bank. The Þnancial assistance of the above entities is gratefully acknowledged. I also thank Michael Baye, Vijay Krishna, and Benny Moldovanu for useful comments. The editorial assistance of Heather Morgan was invaluable in enhancing the readability of this paper.