All Rights Reserved
AccessEcon LLC 2006, 2008.
Powered by MinhViet JSC

Hikmet Gunay and Xin Meng
''Predatory Bidding in Sequential Auctions''
( 2007, Vol. 4 No.12 )
The Turkish government wanted to sell two GSM (cell-phone) licenses in 2000 with sequential auctions. The winning bid in the first auction would be the reserve price for the second auction. This auction design gives incentives to ``predatory bidding." We show how a strategic firm will bid too high in the first auction hence, no other firms can pay the reserve price in the second auction. The winning firm will make up for the high-bid in terms of more profit due to less competition in the market. We show that the government could have sold the two licenses and raised more revenue in a correctly designed sequential auction.
D4 - Market Structure and Pricing: General
Manuscript Received : Mar 02 2007 Manuscript Accepted : Apr 08 2007

  This abstract has been downloaded 1765 times                The Full PDF of this paper has been downloaded 155958 times