On the incidence of commissions in auction markets

Ginsburgh Victor, Legros Patrick, Sahuguet Nicolas

We analyze the welfare consequences of an increase in the commissions charged by intermediaries in auction markets. Commissions are similar to taxes imposed on buyers and sellers, and standard economics suggests that both sellers and buyers are made worse off by the tax. However, we show that when the buyers’ participation constraint binds and when sellers set optimal reservation prices, the level of commissions correlates participation and reservation prices in such a way that participating buyers strictly gain from higher commissions.

Type Working paper
Identificateur info:ulb-repo/collection/3
Language en
Length 16 p.
  • Europe as an Area of Economic and Social Regulation
  • Economie
Publication date 2010-09
  • auction
  • intermediation
  • commissions
  • welfare
ULB Institutional Reference http://hdl.handle.net/2013/ULB-DIPOT:oai:dipot.ulb.ac.be:2013/230861