Selection effects in auctions for monopoly rights |
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Authors: | Maarten CW Janssen Vladimir A Karamychev |
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Institution: | a Erasmus University Rotterdam and Tinbergen Institute, The Netherlands b Erasmus University Rotterdam, The Netherlands |
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Abstract: | We demonstrate that auctioning market licenses may result in higher market prices than assigning them via more random allocation mechanisms. When future market profit is uncertain, winning an auction is like winning a lottery ticket. If firms differ in risk attitudes, auctions select the least risk-averse firm, which, in turn, set a higher price (or a higher quantity, in case quantity is the decision variable) in the marketplace than an average firm. |
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Keywords: | D43 D44 D82 |
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