Inefficient Rushes in Auctions

Hernando-Veciana, A.; Michelucci, F.

doi:10.3982/te2513

Inefficient Rushes in Auctions

Hernando-Veciana, A.; Michelucci, F.

Authors

Professor Angel Hernando-Veciana angel.hernando-veciana@durham.ac.uk
Visiting Professor

F. Michelucci

Abstract

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.

Citation

Hernando-Veciana, A., & Michelucci, F. (2018). Inefficient Rushes in Auctions. Theoretical Economics, 13(1), 273-306. https://doi.org/10.3982/te2513

Journal Article Type	Article
Acceptance Date	Jan 4, 2017
Online Publication Date	Feb 1, 2018
Publication Date	Jan 1, 2018
Deposit Date	Jun 15, 2018
Publicly Available Date	Jun 18, 2018
Journal	Theoretical Economics
Print ISSN	1933-6837
Electronic ISSN	1555-7561
Publisher	Econometric Society
Peer Reviewed	Peer Reviewed
Volume	13
Issue	1
Pages	273-306
DOI	https://doi.org/10.3982/te2513
Public URL	https://durham-repository.worktribe.com/output/1328725

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Copyright Statement
Copyright © 2018 The Authors. Theoretical Economics. The Econometric Society. This is an open access article under the terms of the Creative Commons Attribution‐NonCommercial License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited and is not used for commercial purposes.