Paul D. Klemperer

Nuffield College
Oxford University
Oxford OX1 1NF

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Nuffield College, Oxford University

NBER Working Papers and Publications

July 2007When are Auctions Best?
with Jeremy I. Bulow: w13268
We compare the two most common bidding processes for selling a company or other asset when participation is costly to buyers. In an auction all entry decisions are made prior to any bidding. In a sequential bidding process earlier entrants can make bids before later entrants choose whether to compete. The sequential process is more efficient because entrants base their decisions on superior information. But pre-emptive bids transfer surplus from the seller to buyers. Because the auction is more conducive to entry in several ways it usually generates higher expected revenue.
January 1997The Generalized War of Attrition
with Jeremy Bulow: w5872
We generalize the War of Attrition model to allow for N + K firms competing for N prizes. Two special cases are of particular interest. First, if firms continue to pay their full costs after dropping out (as in a standard-setting context), each firm's exit time is independent both of K and of the actions of other players. Second, in the limit in which firms pay no costs after dropping out (as in a natural-oligopoly problem), the field is immediately reduced to N + 1 firms. Furthermore, we have perfect sorting, so it is always the K 1 lowest-value players who drop out in zero time, even though each player's value is private information to the player. We apply our model to politics, explaining the length of time it takes to collect a winning coalition to pass a bill.

Published: American Economic Review, Vol. 89, no. 1 (March 1999): 175-189. citation courtesy of

January 1994Auctions vs. Negotiations
with Jeremy Bulow: w4608
Which is the more profitable way to sell a company: a public auction or an optimally structured negotiation with a smaller number of bidders? We show that under standard assumptions the public auction is always preferable, even if it forfeits all the seller's negotiating power, including the ability to withdraw the object from sale, provided that it attracts at least one extra bidder. An immediate public auction also dominates negotiating while maintaining the right to hold an auction subsequently with more bidders. The results hold for both the standard independent private values model and a common values model. They suggest that the value of negotiating skill is small relative to the value of additional competition.

Published: Bulow, Jeremy and Paul Klemperer. "Auctions Versus Negotiations," American Economic Review, 1996, v86(1,Mar), 180-194.

March 1988Exchange Rate Pass-Through When Market Share Matters
with Kenneth A. Froot: w2542
We investigate pricing to market when the exchange rate changes in cases where firms' future demands depend on their current market shares. We show that i) profit maximizing foreign firms may either raise or lower their domestic currency export prices when the domestic exchange rate appreciates temporarily (i.e. the "pass-through" from exchange rate changes to import prices may be perverse); ii) current import prices may be more sensitive to the expected future exchange rate than to the current exchange rate; iii) current import prices fall in response to an increase in uncertainty about the future exchange rate. We present evidence that suggests the behavior of expected future exchange rates may provide a clue to the puzzling behavior of U.S. import prices during the 1980s.

Published: "Exchange-Rate Pass Through When Market Share Matters." From The American Economic Review, Vol. 79, No. 4, pp. 637-654, (September 1989). citation courtesy of

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