Auction prices, market share, and a common agent

Vol: 
24/2011
Author name: 
Coatney KT
Shaffer SL
Menkhaus DJ
Year: 
2011
Month: 
July
Abstract: 

The primary pro-competitive justification for multiple principals to hire a common bidding agent is efficiency. The efficiency gained by doing so increases the advantage of the common bidding agent. Almost common value auction theory predicts that an advantaged bidder is able to reduce competition by credibly enhancing the ‘winner’s curse’ of disadvantaged rivals. The credible threat results in disadvantaged rivals exiting the bidding process early, leaving the advantaged bidder to purchase most, if not all, units at lower prices than when rivals have common values. The results of our empirical study of a common bidding agent are consistent with this theory.

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