The paper studies whether passive ownership links between bidders in auctions are bad for the seller and overall society. It is shown that ownership links damage the seller and society in all standard auctions; moreover, the bidders may be impaired by the seller's strategic reaction. Instead, in the optimal selling procedure both the seller's revenue and social surplus are increasing with the intensity of ownership links. Both the cases of nonstrategic and strategic entry are considered.
Cross-Owned Firms Competing in Auctions
CHILLEMI, OTTORINO
2005
Abstract
The paper studies whether passive ownership links between bidders in auctions are bad for the seller and overall society. It is shown that ownership links damage the seller and society in all standard auctions; moreover, the bidders may be impaired by the seller's strategic reaction. Instead, in the optimal selling procedure both the seller's revenue and social surplus are increasing with the intensity of ownership links. Both the cases of nonstrategic and strategic entry are considered.
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