We analyze a setting common in privatizations, public tenders, and takeovers in which the ex post efficient allocation, i.e., the first best, is not implementable. Our first main result is that the open ascending auction is not second best because it is prone to rushes, i.e., all active bidders quitting simultaneously, that undermine its efficiency. Our second main result is that the second best can be implemented with a two-round auction used in real-life privatizations. We also show how this result generalizes using a survival auction with a novel tie-breaking rule.

Inefficient rushes in auctions

Michelucci F.
2018

Abstract

We analyze a setting common in privatizations, public tenders, and takeovers in which the ex post efficient allocation, i.e., the first best, is not implementable. Our first main result is that the open ascending auction is not second best because it is prone to rushes, i.e., all active bidders quitting simultaneously, that undermine its efficiency. Our second main result is that the second best can be implemented with a two-round auction used in real-life privatizations. We also show how this result generalizes using a survival auction with a novel tie-breaking rule.
File in questo prodotto:
File Dimensione Formato  
TE_InefficientRushes.pdf

accesso aperto

Tipologia: Versione dell'editore
Licenza: Accesso libero (no vincoli)
Dimensione 398 kB
Formato Adobe PDF
398 kB Adobe PDF Visualizza/Apri

I documenti in ARCA sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/10278/3719982
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 2
  • ???jsp.display-item.citation.isi??? 2
social impact