Working Paper: CEPR ID: DP2581
Authors: Paul Klemperer
Abstract: The most important issues in auction design are the traditional concerns of competition policy-preventing collusive, predatory, and entry deterring behaviour. Ascending and uniform-price auctions are particularly vulnerable to these problems (we discuss radiospectrum and football TV-rights auctions, electricity markets, and takeover battles), and the Anglo-Dutch auction ? a hybrid of the sealed-bid and ascending auctions may often perform better. However, everything depends on the details of the context; the circumstances of the recent UK mobile-phone license auction made an ascending format ideal. We also discuss the current 3G spectrum auctions in Germany and the Netherlands. Auction design is a matter of ?horses for courses?, not ?one size fits all?.
Keywords: Antitrust; Auction Theory; Auctions; Bidding; Collusion; Electricity; Entry; Entry Deterrence; Mechanism Design; Mobile Phones; Predation; Radiospectrum; Takeovers; Telecommunications; UMTS
JEL Codes: D43; D44; L13; L41; L96
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| ascending and uniform-price auctions (D44) | collusion (D74) |
| collusion (D74) | low revenue outcome (H27) |
| ascending auctions (D44) | deter entry (F55) |
| firm that values winning most (L21) | dominate bidding process (D44) |
| dominate bidding process (D44) | discourage other firms from entering (L19) |
| Anglo-Dutch auction format (D44) | alleviate collusion issues (L12) |
| Anglo-Dutch auction format (D44) | encourage entry (L26) |
| Dutch auction design (D44) | poor entry outcomes (I24) |
| Dutch auction design (D44) | low revenues (H27) |