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Auction Markets (auction + market)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Dealer Liquidity in an Auction Market: Evidence from the London Stock Exchange,

THE ECONOMIC JOURNAL, Issue 522 2007
Sylvain Friederich
We analyse the trade characteristics and market conditions which determine the market share of a continuous auction trading system at the London Stock Exchange, where a network of broker-dealer firms is also available for trade. We show that execution and information risks govern the choice of execution venue. Further, we uncover strong commonality in the market share of the order book across stocks, and find that variables proxying for market-wide liquidity and informational risks also affect the choice of trading venue. Our results suggest that competing, off-book liquidity suppliers voluntarily perform at least some of the ,stabilisation' functions normally assigned to designated market-makers. [source]

Reputation, Trust, and Rebates: How Online Auction Markets Can Improve Their Feedback Mechanisms

JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 2 2010
Lingfang (Ivy) LiArticle first published online: 13 MAY 2010
Reputation systems constitute an important institution, helping sustain trust in online auction markets. However, only half of buyers leave feedback after transactions, and nearly all feedback is positive. In this paper, I propose a mechanism whereby sellers can provide rebates (not necessarily in monetary form) to buyers contingent upon buyers' provision of reports. Using a game theoretical model, I show how the mechanism can increase unbiased reporting. There exists a pooling equilibrium where both good and bad sellers choose the rebate option, even though their true types are revealed through feedback. The mechanism also induces bad sellers to improve the quality of the contract. [source]

Resource Allocation Auctions within Firms

JOURNAL OF ACCOUNTING RESEARCH, Issue 5 2007
STANLEY BAIMAN
ABSTRACT There is growing interest in the use of markets within firms. Proponents have noted that markets are a simple and efficient mechanism for allocating resources in economies in which information is dispersed. In contrast to the use of markets in the broader economy, the efficiency of an internal market is determined in large part by the endogenous contractual incentives provided to the participating, privately informed agents. In this paper, we study the optimal design of managerial incentives when resources are allocated by an internal auction market, as well as the efficiency of the resulting resource allocations. We show that the internal auction market can achieve first-best resource allocations and decisions, but only at an excessive cost in compensation payments. We then identify conditions under which the internal auction market and associated optimal incentive contracts achieve the benchmark second-best outcome as determined using a direct revelation mechanism. The advantage of the auction is that it is easier to implement than the direct revelation mechanism. When the internal auction mechanism is unable to achieve second-best, we characterize the factors that determine the magnitude of the shortfall. Overall, our results speak to the robust performance of relatively simple market mechanisms and associated incentive systems in resolving resource allocation problems within firms. [source]

Managing Risks in Multiple Online Auctions: An Options Approach,

DECISION SCIENCES, Issue 3 2005
Ram Gopal
ABSTRACT The scenario of established business sellers utilizing online auction markets to reach consumers and sell new products is becoming increasingly common. We propose a class of risk management tools, loosely based on the concept of financial options that can be employed by such sellers. While conceptually similar to options in financial markets, we empirically demonstrate that option instruments within auction markets cannot be developed employing similar methodologies, because the fundamental tenets of extant option pricing models do not hold within online auction markets. We provide a framework to analyze the value proposition of options to potential sellers, option-holder behavior implications on auction processes, and seller strategies to write and price options that maximize potential revenues. We then develop an approach that enables a seller to assess the demand for options under different option price and volume scenarios. We compare option prices derived from our approach with those derived from the Black-Scholes model (Black & Scholes, 1973) and discuss the implications of the price differences. Experiments based on actual auction data suggest that options can provide significant benefits under a variety of option-holder behavioral patterns. [source]

Reputation, Trust, and Rebates: How Online Auction Markets Can Improve Their Feedback Mechanisms

JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 2 2010
Lingfang (Ivy) LiArticle first published online: 13 MAY 2010
Reputation systems constitute an important institution, helping sustain trust in online auction markets. However, only half of buyers leave feedback after transactions, and nearly all feedback is positive. In this paper, I propose a mechanism whereby sellers can provide rebates (not necessarily in monetary form) to buyers contingent upon buyers' provision of reports. Using a game theoretical model, I show how the mechanism can increase unbiased reporting. There exists a pooling equilibrium where both good and bad sellers choose the rebate option, even though their true types are revealed through feedback. The mechanism also induces bad sellers to improve the quality of the contract. [source]

Preferred suppliers in auction markets

THE RAND JOURNAL OF ECONOMICS, Issue 2 2009
Roberto Burguet
This article examines agreements between a buyer and one of the suppliers which increase their joint surplus. The provisions of such agreements depend on the buyer's ability to design the rules of the final procurement auction. When the buyer does not have this ability, their joint surplus can be increased by an agreement which grants to the preferred supplier a right of first refusal on the lowest price from the other suppliers. When the buyer has this ability, their joint surplus can be maximized by a revelation game for the cost of the preferred supplier and a reserve price based on that cost. [source]

Do EU direct payments to beef producers belong in the ,blue box'?

AUSTRALIAN JOURNAL OF AGRICULTURAL & RESOURCE ECONOMICS, Issue 1 2003
Seamus McErlean
In the Uruguay Round Agreement on Agriculture, so-called ,blue box' support measures were exempted from reduction commitments, provided they were delivered under ,production-limiting' programs. Although classified as ,blue box', the EU system of direct payments (DP) to beef farmers imposes ,claim-limiting' restrictions rather than ,production-limiting' restrictions, allowing farmers to keep additional animals over and above the number upon which they are eligible to claim DP. The present paper provides empirical evidence that EU direct payments capitalise into the market prices of male calves and young steers in Ireland. It is also likely that DP capitalises into the prices of beef cows and heifers. Given this capitalisation process, some farmers can obtain ,capitalised' DP on animals produced over and above the ,claim-limiting' restrictions, by selling these animals through auction markets. Thus, ,capitalised' DP probably encourages production over and above the limiting measures. [source]