Speculation in Procurement Auctions

• DOI: 10.48550/arxiv.2203.03044
• Publication Date: 2022-01-01
• Authors: Shanglyu Deng
• Keywords: Dutch auction; Multiunit auction

A speculator can take advantage of a procurement auction by acquiring items for sale before the auction. The accumulated market power then be exercised in and may lead to large enough gain cover acquisition costs. I show that speculation always generates positive expected profit second-price auctions but could unprofitable first-price auctions. In case where is profitable auctions, it more This comparison profitability driven different competition patterns two mechanisms. terms welfare, causes private value destruction harms efficiency. Sellers benefit from offer made speculator. Therefore, comes at expense auctioneer.