TY  - JOUR
AU  - Krishna,Kala
TI  - Auctions with Endogenous Valuations, The Snowball Effect Revisited
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3483
PY  - 1990
Y2  - October 1990
UR  - http://www.nber.org/papers/w3483
L1  - http://www.nber.org/papers/w3483.pdf
N1  - Author contact info:
Kala Krishna
Department of Economics
523 Kern Graduate Building
The Pennsylvania State University
University Park, PA 16802
Tel: 814/865-1106
Fax: 814/863-4775
E-Mail: kmk4@psu.edu
AB  - In most of the literature on auctions the valuations of agents are exogenously specified. This assumption may be inappropriate in a number of cases where valuations are better derived endogenously. Endogenous valuations are appropriate when there are many units being auctioned and their value is determined in a secondary market which is imperfectly competitive. The model is thus appropriate for studying the sale of quota licenses and scarce resources used in production when product markets are imperfectly competitive. A series of examples are developed to show how these models work. Particular models are developed which cast light on a number of issues in applied micro-economics. These issues include the evolution of market structure, in particular, the "snowball effect", the effect an market structure of selling quota licenses, and the relationship between increasing returns to scale and the monopolization of markets. The models also provide another resolution of the "transponder puzzle".
ER  -