Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Friday, October 4, 2013

Regulating Bidder Participation in Auctions

Vivek Bhattacharya, James W. Roberts (Duke), and Andrew Sweeting (Duke) discuss Regulating Bidder Participation in Auctions.

ABSTRACT: Regulating bidder participation in auctions can potentially increase efficiency compared to standard auction formats with free entry. We show that the relative performance of two such mechanisms, a standard first-price auction with free entry and an entry rights auction, depends non-monotonically on the precision of information that bidders have about their costs prior to deciding whether to participate in a mechanism. As an empirical application, we estimate parameters from first-price auctions with free entry for bridge-building contracts in Oklahoma and Texas and predict that an entry rights auction increases efficiency and reduces procurement costs significantly.

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