Essays on Auctions, Tournaments, and Imperfect Competition [Elektronische Ressource] / Wei Ding

Wei Ding

Informations

• Publié par: rheinische_friedrich-wilhelms-universitat_bonn
• Publié le: 01 janvier 2011
• Nombre de lectures: 13
• Langue: English
• Poids de l'ouvrage: 1 Mo

Extrait

Essays on Auctions,
Tournaments, and
Imperfect Competition
Inaugural-Dissertation
zur Erlangung des Grades eines Doktors
der Wirtschafts- und Gesellschaftswissenschaften
durch die
Rechts- und Staatswissenschaftliche Fakultat¨
der Rheinischen Friedrich-Wilhelms-Universitat¨
Bonn
vorgelegt von
Wei DING
aus Hubei, China
2011Erstreferent: JProf. Dr. Anja Schottner¨
Zweitreferent: Prof. Dr. Matthias Krak¨ el
Tag der Promotion: 08. September 2011Contents
1. Introduction 1
I. Procurement of Innovation: Tournaments vs Auc-
tions 19
2. Procurement of Innovation under Imperfect Commitment 21
2.1. Introduction . . . . . . . . . . . . . . . . . . . . . 21
2.2. The model . . . . . . . . . . . . . . . . . . . . . . 29
2.3. Baseline optimal mechanisms . . . . . . . . . . . . 37
2.4. Imperfect commitment . . . . . . . . . . . . . . . 40
2.4.1. Optimal auction . . . . . . . . . . . . . . . 41
2.4.2. Fixed-prize tournament . . . . . . . . . . . 47
2.5. Superiority of the fixed-prize tournament . . . . . . 55ii Contents
2.6. The auction cannot be improved by a minimum score 60
2.7. Discussion . . . . . . . . . . . . . . . . . . . . . . 61
2.A. Appendix . . . . . . . . . . . . . . . . . . . . . . 62
2.A.1. Proof of Lemma 2.1 . . . . . . . . . . . . 62
2.A.2. Supplement to the proof of Lemma 2.3 . . 63
2.A.3. Proof of Lemma 2.4 . . . . . . . . . . . . 65
3. Technical Supplement 69
3.1. Introduction . . . . . . . . . . . . . . . . . . . . . 69
3.2. Supplement to the proof of Lemma 2.6 . . . . . . . 70
3.3. Optimal fixed-prize tournament . . . . . . . . . . . 75
3.4. Minimum score requirement . . . . . . . . . . . . 78
II. Strategic Information Transmission in Sequential
Auctions 85
4. Signal Jamming in a Sequence of First-Price Auctions 87
4.1. Introduction . . . . . . . . . . . . . . . . . . . . . 87
4.2. The model . . . . . . . . . . . . . . . . . . . . . . 91
4.3. Equilibrium strategies . . . . . . . . . . . . . . . . 92
4.3.1. Equilibrium in the second auction . . . . . 94Contents iii
4.3.2. Equilibrium in the first auction . . . . . . . 100
4.4. Signal-jamming . . . . . . . . . . . . . . . . . . . 103
4.5. Dynamics of equilibrium prices . . . . . . . . . . 109
4.6. Discussion . . . . . . . . . . . . . . . . . . . . . . 116
4.A. Appendix . . . . . . . . . . . . . . . . . . . . . . 120
4.A.1. Some notes on the tie rule . . . . . . . . . 120
III. Signaling in Market Games with Downstream In-
teraction 123
5. Decentralized Union-Oligopoly Bargaining 125
5.1. Introduction . . . . . . . . . . . . . . . . . . . . . 125
5.2. The model . . . . . . . . . . . . . . . . . . . . . . 129
5.3. Benchmark model(s) without signaling . . . . . . . 133
5.3.1. Benchmark model A: Stage game without
signaling . . . . . . . . . . . . . . . . . . 134
5.3.2. Benchmark model B: Simultaneous moves
game without signaling . . . . . . . . . . . 136
5.4. How signaling affects the equilibrium wage profile 138
5.4.1. Solution of the duopoly subgames . . . . . 140
5.4.2. Equilibrium wage bargaining . . . . . . . . 142iv Contents
5.5. Discussion . . . . . . . . . . . . . . . . . . . . . . 149
5.A. Appendix . . . . . . . . . . . . . . . . . . . . . . 151
5.A.1. Supplement to the proof of Proposition 5.3 151
6. Horizontal mergers in oligopoly: first-price vs. profit-
share auction 153
6.1. Introduction . . . . . . . . . . . . . . . . . . . . . 153
6.2. Model . . . . . . . . . . . . . . . . . . . . . . . . 160
6.3. Takeover bidding without signaling . . . . . . . . . 163
6.3.1. First-price auction . . . . . . . . . . . . . 164
6.3.2. Profit-share auction . . . . . . . . . . . . . 168
6.3.3. Superiority of the profit-share auction . . . 171
6.4. Takeover bidding with signaling . . . . . . . . . . 173
6.4.1. Downstream oligopoly “subgames” . . . . 175
6.4.2. First-price auction with signaling . . . . . 177
6.4.3. Profit-share auction with signaling . . . . . 178
6.5. Discussion . . . . . . . . . . . . . . . . . . . . . . 182
6.A. Appendix . . . . . . . . . . . . . . . . . . . . . . 183
6.A.1. Linear example . . . . . . . . . . . . . . . 183
6.A.2. Supplement to the proof of Proposition 6.1 184
6.A.3. to the proof of 6.2 185Contents v
6.A.4. Supplement to the proof of Proposition 6.4 186
6.A.5. to the proof of 6.5 187
6.A.6. Supplement to the proof of Proposition 6.6 188
Bibliography 2021. Introduction
This thesis is a collection of essays in applied microeconomic theory
that deal with issues of market design, incomplete information, and
imperfect competition.
It is composed of three parts:
Part I: Procurement of innovation: tournaments vs auctions
Part II: Strategic information transmission in sequential auc-
tions
Part III: Signaling in market games with downstream interac-
tion.
Part I deals with the procurement of innovations and compares the
performance of two prominent procurement mechanisms: scoring2 Introduction
auctions and fixed-prize tournaments, two widely used and well
documented methods to procure innovations.
In the past, when intellectual property rights were not well estab-
lished and royalty licensing was not feasible, fixed-prize tournaments
were employed to procure major innovations. In 1795, Napoleon´
Bonaparte offered a prize of FF12.000 for a method of food preser-
vation that was in high need to serve his military excursions across
Europe. The winner of that tournament was Nicolas Appert, who
invented the method of food canning, which is still widely used today.
And in 1714 the British Parliament offered a prize of £20.000 for a
method to determine longitude at sea, following a series of maritime
disasters. That prize was won by John Harrison who invented the
1first mechanical chronometer.
More recent examples range from the procurement of weapon sys-
tems, energy efficient refrigerators, and pharmaceutical innovations,
to the awarding of academic grants and fellowships, to name just a
few.
Similarly, scoring auctions are widely used in the procurement of
1However, the prize committee was dominated by astronomers who pursued their
own agenda, sabotaged the work of the clockmaker, and tried to withhold the
prize from him (see Sobel, 1996).