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Repeated Auctions with Impatient Bidders and Externalities

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  • Ki-Eun Rhee

Abstract

This article studies collusion in repeated auctions both among patient and among impatient bidders when the outside option of the participation constraint is endogenous due to negative externalities. We find that (i) there are no bidding wars along the equilibrium path both for patient and for impatient bidders; compared to the optimal collusive bidding scheme for patient bidders, that for impatient bidders involves (ii) a lower threshold type above which bidding starts when externalities are small or (iii) more frequent jumps in a bidding scheme when externalities are large. The results carry an empirical implication that we should observe either a higher probability of sales or a higher number of bid levels in auctions that are repeatedly offered in unstable markets than those offered in stable markets.

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  • Ki-Eun Rhee, 2010. "Repeated Auctions with Impatient Bidders and Externalities," Southern Economic Journal, John Wiley & Sons, vol. 77(2), pages 482-500, October.
    • Handle: RePEc:wly:soecon:v:77:y:2010:i:2:p:482-500
    DOI: 10.4284/sej.2010.77.2.482
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