American Economic Review: Vol. 103 No. 5 (August 2013)


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When Should Sellers Use Auctions?

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Roberts, James W., and Andrew Sweeting. 2013. "When Should Sellers Use Auctions?" American Economic Review, 103(5): 1830-61.

DOI: 10.1257/aer.103.5.1830


A bidding process can be organized so that offers are submitted simultaneously or sequentially. In the latter case, potential buyers can condition their behavior on previous entrants' decisions. The relative performance of these mechanisms is investigated when entry is costly and selective, meaning that potential buyers with higher values are more likely to participate. A simple sequential mechanism can give both buyers and sellers significantly higher payoffs than the commonly used simultaneous bid auction. The findings are illustrated with parameters estimated from simultaneous entry USFS timber auctions where our estimates predict that the sequential mechanism would increase revenue and efficiency.

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Roberts, James W. (Duke U)
Sweeting, Andrew (Duke U)

JEL Classifications

D44: Auctions
L73: Forest Products
Q23: Renewable Resources and Conservation: Forestry

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