Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/86265 
Year of Publication: 
2004
Series/Report no.: 
Tinbergen Institute Discussion Paper No. 04-122/1
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
Multi-unit ascending auctions allow for equilibria in which bidders strategically reduce their demand and split the market at low prices. At the same time, they allow for preemptive bidding by incumbent bidders in a coordinated attempt to exclude entrants from the market. We consider an environment where both demand reduction and preemptive bidding are supported as equilibrium phenomena of the ascending auction. In a series of experiments, we compare its performance to that of the discriminatory auction. Strategic demand reduction is quite prevalent in the ascending auction even when entry by the newcomer imposes a (large) negative externality on incumbents. As a result, the ascending auction performs worse than the discriminatory auction both in terms of revenue and efficiency, while the two auction formats offer similar chances for newcomers to enter the market.
Subjects: 
Multi-license auctions
demand reduction
external effects
preemption
JEL: 
D44
D45
C91
Document Type: 
Working Paper

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