Optimal privatisation using qualifying auctions

J. Boone, J.K. Goeree

Research output: Contribution to journalArticleScientificpeer-review

Abstract

This article explores use of auctions for privatising public assets. In our model, a single ‘insider’ bidder possesses information about the asset's common value. Bidders are privately informed about their costs of exploiting the asset. Due to the insider's presence, uninformed bidders face a strong winner's curse in standard auctions. We show that the optimal mechanism discriminates against the informationally advantaged bidder. It can be implemented via a two-stage ‘qualifying auction’. In the first stage, non-binding bids are submitted to determine who enters the second stage, which consists of a standard second-price auction augmented with a reserve price.
Original languageEnglish
Pages (from-to)277-297
JournalEconomic Journal
Volume119
Issue number534
Publication statusPublished - 2009

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Auctions
Assets
Privatization
Insider
Winner's curse
Bid
Common values
Second-price auction
Reserve price
Costs

Cite this

Boone, J., & Goeree, J. K. (2009). Optimal privatisation using qualifying auctions. Economic Journal, 119(534), 277-297.
Boone, J. ; Goeree, J.K. / Optimal privatisation using qualifying auctions. In: Economic Journal. 2009 ; Vol. 119, No. 534. pp. 277-297.
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Boone, J & Goeree, JK 2009, 'Optimal privatisation using qualifying auctions' Economic Journal, vol. 119, no. 534, pp. 277-297.

Optimal privatisation using qualifying auctions. / Boone, J.; Goeree, J.K.

In: Economic Journal, Vol. 119, No. 534, 2009, p. 277-297.

Research output: Contribution to journalArticleScientificpeer-review

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