« Monopoly Power: Use, Proof, and Relationship to Anticompetitive Effects in Section 2 Cases | Main | TOP 5 Most Downloaded New Papers for Antitrust in the Past Two Months (November 24, 2008 - January 23, 2009) »
January 23, 2009
Auctions with Positive Synergies: Experimental Evidence
Posted by D. Daniel Sokol
YuenLeng Chow, National University of Singapore (Real Estate) and Abdullah Yavas, Pennsylvania State University (Business Administration) discuss Auctions with Positive Synergies: Experimental Evidence.
ABSTRACT: In a standard auction, bidders bid more aggressively when the number of bidders increases. However, Krishna and Rosenthal (1996, Games and Economic Behavior) show that when bidders have multiple-unit demand that generates positive synergies, bidders bid less aggressively as the number of bidders increases. The first objective of this paper is to offer experimental evidence on this seemingly counter-intuitive theoretical prediction. Following the model of Krishna and Rosenthal, we design a simultaneous second-price sealed-bid auction for two objects with two types of bidders: single-object and multiple-object demand bidders. Our results show that bidders bid less aggressively with increased competition. The second objective is to investigate the effect of offering global bidders the option of bidding for both objects as a package as well as submitting individual bids for each object. Controlling for bidders' valuat! ions, we find that offering this option to global bidders increases allocative efficiency and sellers' revenue.
January 23, 2009 | Permalink
TrackBack URL for this entry:
Listed below are links to weblogs that reference Auctions with Positive Synergies: Experimental Evidence: