Abstract.
This paper considers the problem of designing selling procedures for substitutes (like condominium units). Oral, ascending auctions for the right to choose are efficient. This is a common type of auction used for the sale of real estate. Efficiency is not optimal from the seller’s viewpoint. An optimal procedure distorts the right-to-choose auction to favor in late rounds bidders whose preferred object has already been sold. This optimal auction is complex. A revenue improving departure from efficiency can be achieved by simply auctioning all the rights to choose before any of them is exerted.
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Received: 5 February 2003, Accepted: 15 February 2005,
JEL Classification:
D44
I acknowledge very helpful comments by Joe Harrington, Ken Hendricks, and anonymous referees. Financial aid from the European Commission through the TMR Program (contract FMRX-CT98-0203) and the Spanish MCyT (Grants SEC 2002-02506 and SEC 2003-08080) is also gratefully acknowledged.
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Burguet, R. The condominium problem; auctions for substitutes. Rev. Econ. Design 9, 73–90 (2005). https://doi.org/10.1007/s10058-005-0121-2
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DOI: https://doi.org/10.1007/s10058-005-0121-2