Tender Auctions with Existing Operators Bidding

Tender Auctions with Existing Operators Bidding

Consider a government tendering a facility, such as an airport or utility, where one bidder owns a competing facility. With a “standard auction”, this “existing operator” bids above the auctioned facility’s expected profit, as winning means being a monopolist instead of a duopolist. This auction leads to an unregulated outcome which hurts welfare. A consumerprice auction can alleviate this prob...

Precautionary Bidding in Auctions

We analyze bidding behavior in auctions when risk-averse buyers bid for a good whose value is risky. We show that when the risk in the valuations increases, DARA bidders will reduce their bids by more than the appropriate increase in the risk premium. Ceteris paribus, buyers will be better off bidding for a more risky object in first price, second price, and English auctions with affiliated com...

Bidding in Combinatorial Auctions

Sequential English Auctions with Shill Bidding

Shill bidding, where a seller masquerades as a buyer bidding for her own item to inflate the price, has challenged the classical auction theories. We show that with the possibility of shill bidding, a multi-round single-unit English auction has neither pure-nor mixed-strategy Perfect Bayesian Equilibria (PBE) when there is no gap between the seller's valuation and the lowest possible buyer valu...

Indicative Bidding in Auctions with Costly Entry∗

When selling a business by auction, investment banks frequently use indicative bids – non-binding preliminary bids – to select a limited number of bidders to participate. We show that if participation is costly, indicative bids can be informative: symmetric equilibrium exists in weakly-increasing strategies, but bidders “pool” over a finite number of bids, so the highest-value bidders are not a...