Optimal privatisation using qualifying auctions

J. Boone, J.K. Goeree

Research output: Contribution to journalArticleScientificpeer-review

8 Citations (Scopus)

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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    Boone, J., & Goeree, J. K. (2009). Optimal privatisation using qualifying auctions. Economic Journal, 119(534), 277-297.