We would like to thank the two anonymous referees for thier detailed comments. Earlier versions of this paper were presented at the eighth annual Lonestar's conference, fall 1997, the spring 1998 Midwest Econimc Theory conference, the European Meetings of the Econometric Society 1998, and seminars at the universities of Magdeburg, Zürich, and Oklahoma. Financial support was received by the Deutsche Forschungs gemeinschaft SFB 373 (“Quantifikation und simulation Ökonomischer Prozesse”), Humboldt-Universität zu Berlin.
Scale Economies and the Dynamics of Recurring Auctions
Article first published online: 26 MAR 2007
Volume 40, Issue 3, pages 403–414, July 2002
How to Cite
Jeitschko, T. D. and Wolfstetter, E. (2002), Scale Economies and the Dynamics of Recurring Auctions. Economic Inquiry, 40: 403–414. doi: 10.1093/ei/40.3.403
- Issue published online: 26 MAR 2007
- Article first published online: 26 MAR 2007
We analyze the dynamics of a game of sequential bidding in the presence of stochastic scale effects, either economies or diseconomies of scale. We show that economies of scale give rise to declining expected equilibrium prices, whereas the converse is not generally true. Moreover, first- and second-price auctions are not always revenue equivalent. Economies of scale make second-price auctions more profitable for the seller, whereas revenue equivalence may be preserved in the case of diseconomies.