Premium
Competition in a Repeated Spatial Auction Market with an Application to Timber Sales
Author(s) -
Rusco Frank W.,
Walls W. David
Publication year - 1999
Publication title -
journal of regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.171
H-Index - 79
eISSN - 1467-9787
pISSN - 0022-4146
DOI - 10.1111/0022-4146.00143
Subject(s) - microeconomics , multiunit auction , english auction , bidding , vickrey auction , generalized second price auction , auction theory , revenue equivalence , proxy bid , valuation (finance) , economics , industrial organization , business , finance
In this paper we develop a model of a repeated spatial auction market. The auction model contributes to the literature on spatial competition by considering the sale of goods in a market with spatial and temporal dimensions, and in which goods are sold by an auction institution instead of a posted‐price institution. In the Nash equilibrium of the spatial auction model, each bidder is found to have a dominance solvable strategy to bid below his net (of transportation costs) valuation for the first unit of the good because there is an option value to not winning, namely that the following units may be locationally preferred to the first unit. The equilibrium bidding strategies lead to the possibility of non–Pareto‐efficient outcomes. The auction model is applied to data from U.S. Forest Service timber sales.