Inefficient rushes in auctions

0490251 - NHÚ 2019 RIV US eng J - Journal Article
Hernando-Veciana, Á. - Michelucci, Fabio
Inefficient rushes in auctions.
Theoretical Economics. Roč. 13, č. 1 (2018), s. 273-306. ISSN 1933-6837. E-ISSN 1555-7561
Institutional support: RVO:67985998
Keywords : privatization * efficiency * auction
OECD category: Economic Theory
Impact factor: 2.160, year: 2018

We analyze a setting common in privatizations, public tenders, and takeovers in which the ex post efficient allocation, i.e., the first best, is not implementable. Our first main result is that the open ascending auction is not second best because it is prone to rushes, i.e., all active bidders quitting simultaneously, that undermine its efficiency. Our second main result is that the second best can be implemented with a two‐round auction used in real‐life privatizations. We also show how this result
generalizes using a survival auction with a novel tie‐breaking rule.
Permanent Link: http://hdl.handle.net/11104/0284515