Working Paper: CEPR ID: DP1754
Authors: Jeremy Bulow; Paul Klemperer
Abstract: We usually assume increases in supply, allocation by rationing, and exclusion of potential buyers will never raise prices. But all of these activities raise the expected price in an important set of cases when common-value assets are sold. Furthermore, when we make the assumptions needed to rule out these ?anomalies? when buyers are symmetric, small asymmetries among buyers necessarily cause the anomalies to reappear.
Keywords: auction theory; common value; winner's curse; PCS auction; spectrum auction; initial public offering (IPO)
JEL Codes: D44; G24; G30; L96
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increasing supply in common value auctions (D44) | Higher expected prices (D49) |
| Symmetric bidders (D44) | Lower expected prices (G13) |
| Asymmetric bidders (D44) | Lower expected prices when fewer units are sold (L11) |
| Restricting supply (D45) | Increased expected revenues (H29) |