STRATEGIC EXCLUSION OF THE HIGHEST-VALUED BIDDERS IN WHOLESALE AUTOMOBILE AUCTIONS.
By restricting bidders to be qualified dealers, wholesale automobile auctions exclude the bidders who place the highest value on the vehicles: consumers. This article provides an explanation for this puzzling entry restriction by modeling the inventory-management decisions of a firm. If an automobil...
| Published in: | Economic Inquiry Vol. 52; no. 3; pp. 1219 - 1231 |
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| Main Authors: | , |
| Format: | Article |
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Wiley-Blackwell
Jul2014
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| Subjects: | |
| Online Access: | View this record in EBSCOhost |
| fields | @attributes: recordID: 1 pdfLink: plink: https://search.ebscohost.com/login.aspx?direct=true&db=ssf&AN=95908270&site=ehost-live header: @attributes: shortDbName: ssf uiTerm: 95908270 longDbName: Social Sciences Full Text (H.W. Wilson) uiTag: AN controlInfo: bkinfo: jinfo: jid: 00952583 EIQ jtl: Economic Inquiry issn: 00952583 maglogo: Y pubinfo: dt: Jul2014 vid: 52 iid: 3 pid: 480 pub: Wiley-Blackwell artinfo: ui: 95908270 10.1111/ecin.12078 ppf: 1219 ppct: 12 formats: fmt: – @attributes: type: T – @attributes: type: P size: 190KB tig: atl: STRATEGIC EXCLUSION OF THE HIGHEST-VALUED BIDDERS IN WHOLESALE AUTOMOBILE AUCTIONS. aug: au: HAMMOND, ROBERT G. MORRILL, THAYER affil: Hammond: DepartmENt of Economics, North Carolina State University, P.O. Box 8110, Raleigh, NC 27695 ‐ 8110. Phone (919) 513 ‐ 2871, Fax (919) 515 ‐ 7873 Morrill: DepartmENt of Economics, North Carolina State University, P.O. Box 8110, Raleigh, NC 27695 ‐ 8110. Phone (919) 513 ‐ 2661, Fax (919) 515 ‐ 7873 su: United States Consumers Economics Automobile auctions Auctions Mathematical models Used car buying Used car sales & prices Automobile dealers Bidders sug: subj: Consumers Economics United States New and used automobile and light-duty truck merchant wholesalers New Car Dealers Automobile and Other Motor Vehicle Merchant Wholesalers Used Car Dealers Automobile auctions Auctions Mathematical models Used car buying Used car sales & prices Automobile dealers Bidders ab: By restricting bidders to be qualified dealers, wholesale automobile auctions exclude the bidders who place the highest value on the vehicles: consumers. This article provides an explanation for this puzzling entry restriction by modeling the inventory-management decisions of a firm. If an automobile dealer has more vehicles in inventory than is optimal, it cannot reduce its inventory by selling directly to consumers without impacting the demand for the automobiles that remain. However, if the dealer sells his/her excess inventory to a competitor, the demand for his/her remaining vehicles increases as the competitor responds by acquiring fewer additional vehicles. We demonstrate that for any market demand function and any cost of the competitor acquiring additional vehicles, a dealer with excess inventory does better by selling a subset of its vehicles to a competitor rather than directly to consumers. We discuss the market for wholesale automobiles in relation to other markets where goods are also auctioned but where entry is not restricted to qualified dealers. Doing so allows us to compare our inventory-management explanation to common explanations provided by industry practitioners. We find that intuitive alternative stories do not consistently explain practices across markets. ( JEL D44, L11, L62) pubtype: Academic Journal doctype: Article src: R language: English refInfo: copyright: @attributes: flag: N holdings: @attributes: islocal: N |
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