A small volume reduction that melts down the market: auctions with endogenous rationing


Ehrhart, Karl-Martin ; Hanke, Ann-Katrin ; Ott, Marion


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URL: https://madoc.bib.uni-mannheim.de/55374
URN: urn:nbn:de:bsz:180-madoc-553741
Document Type: Working paper
Year of publication: 2020
The title of a journal, publication series: ZEW Discussion Papers
Volume: 20-014
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: D82 , Q48 , D47 , D44,
Keywords (English): Auction , participation , market design , optimal mechanism , renewable energy support
Abstract: Auctions with endogenous rationing have been introduced to stimulate competition. Such (procurement) auctions reduce the volume put out to tender when competition is low. This paper finds a strong negative effect of endogenous rationing on participation when bid-preparation is costly, counteracting the aim to stimulate competition. For multiple auctioneer's objectives mentioned in directives, we derive optimal mechanisms, which differ due to different evaluation of the tradeoff between participation and bid-preparation costs. Thus, the auctioneer needs to decide on an objective. However, reducing bid-preparation costs improves the optimal values of multiple objective functions.

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Ehrhart, Karl-Martin ; Hanke, Ann-Katrin ; Ott, Marion (2020) A small volume reduction that melts down the market: auctions with endogenous rationing. Open Access ZEW Discussion Papers Mannheim 20-014 [Working paper]
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