Auctions with resale: a survey
Recently emerged, auction theory has become a well-established branch of theoretical economics with important practical applications. As the theory progresses, its basic assumptions become the subject of further investigation and thus new directions emerge. Microeconomics in general and auction theory in particular too often assume away aftermarket interactions, which are a common feature of real markets and have a powerful impact on strategies and incentives. Lately, however, a body of literature emerged that incorporates the possibility of resale into game-theoretic analysis of auctions. This paper reviews this literature. It highlights the role of bargaining power on the aftermarket as one of the main issues in this literature. It then reports how standard auction formats – first and second price auctions in particular – compare in terms of the seller’s revenues they generate. Then, this paper shows generalizations of Myerson’s approach to constructing optimal auctions when resale is possible; the discussed models require delicate assumptions. Next, the survey covers more specific issues: different approaches to modelling the aftermarket, decisions to enter the primary auction, effects of disclosing information from the primary auction and the role of speculators. Finally, the paper overviews empirical research on auctions with resale, the newest branch of this literature that is developing rapidly.
We experimentally study the effects of allotment—the division of an item into homogeneous units—in independent private value auctions. We compare a bundling first-price auction with two equivalent treatments where allotment is implemented: a two-unit discriminatory auction and two simultaneous single-unit first-price auctions. We find that allotment in the form of a discriminatory auction generates a loss of efficiency with respect to bundling. In the allotment treatments, we observe large and persistent bid spread, and the discriminatory auction is less efficient than simultaneous auctions. We provide a unified interpretation of our results that is based on both a non-equilibrium response to the coordination problem characterizing the simultaneous auction format and a general class of behavioral preferences that includes risk aversion, joy of winning and loser’s regret as specific cases. © 2016 Economic Science Association
Germany was the first country in Europe that auctioned off spectrum in the valuable 700 MHz band for mobile telecommunication usage. The German regulator decided to sell this spectrum together with spectrum in the 900 MHz and 1800 MHz legacy bands. With only the three incumbent operators bidding in the auction and a relatively transparent auction design, it was possible to get a very clear impression of the actual bidding behaviour. We show that in the beginning of the auction, bidders were actively searching for a way to allocate the available spectrum that all bidders could agree to at low prices. Bidders were teaching each other what they should bid and were providing carrots and sticks. When the excess demand was concentrated in one band only, bidders started to compete head on leading to a war of attrition. This competition only stopped when bidders started to raise prices in bands that were already cleared. We interpret this bidding behaviour in terms of bidders expressing allocative externalities and conclude that the ability to do so may be regarded as a positive aspect of the transparent design.
In 2004–2005 the Russian government started to implement the reform of public procurement. In order to decrease incentives to corruption and encourage competition, they established new procurement procedures. Meanwhile, according to the anecdotal evidence, since the decade of the reform, diff erent types of rent-seeking behavior have been still widespread in Russian procurement. In this article we conduct a comparative analysis of the procurement procedures in Federal Law 44 depending on the risks of rent-seeking behavior of public procurers and suppliers. We consider restrictions of competition to be indicators of corruption risks, i.e. the procurer’s rent-seeking behavior, and collusive practices (including imitation of collusion) and adverse selection to be indicators of the bidder’s rent-seeking behavior. At fi rst we describe Russian procurement procedures and then we employ the case-study in order to analyze in-depth risks of various forms of rent-seeking behavior. We fi nd that the risks of procurers’ rent-seeking behavior are negatively connected to the risks of suppliers’ rent-seeking. Some procurement procedures have more corruption risks, while others provide ample opportunities for collusion practices or an adverse selection. Basing on these results, we make recommendations to the regulator and to the government. First, the stimulating eff ect of monitoring will be higher under fi xed monitoring costs, if the regulator monitors more probable forms of rentseeking in each procurement procedure. Second, the social welfare will be highest, if the choice of procurement procedure is based not only on the product’s characteristics, but also on the market structure, including the risks of horizontal collusion.
The paper examines the structure, governance, and balance sheets of state-controlled banks in Russia, which accounted for over 55 percent of the total assets in the country's banking system in early 2012. The author offers a credible estimate of the size of the country's state banking sector by including banks that are indirectly owned by public organizations. Contrary to some predictions based on the theoretical literature on economic transition, he explains the relatively high profitability and efficiency of Russian state-controlled banks by pointing to their competitive position in such functions as acquisition and disposal of assets on behalf of the government. Also suggested in the paper is a different way of looking at market concentration in Russia (by consolidating the market shares of core state-controlled banks), which produces a picture of a more concentrated market than officially reported. Lastly, one of the author's interesting conclusions is that China provides a better benchmark than the formerly centrally planned economies of Central and Eastern Europe by which to assess the viability of state ownership of banks in Russia and to evaluate the country's banking sector.
The paper examines the principles for the supervision of financial conglomerates proposed by BCBS in the consultative document published in December 2011. Moreover, the article proposes a number of suggestions worked out by the authors within the HSE research team.