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OPTIMAL PRIVATISATION USING QUALIFYING AUCTIONS
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DOI：10.1111/j.1468-0297.2008.02213.x.png)
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Abstract
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This article explores use of auctions for privatising public assets. In our model, a single 'insider' bidder possesses information about the asset's common value. Bidders are privately informed about their costs of exploiting the asset. Due to the insider's presence, uninformed bidders face a strong winner's curse in standard auctions. We show that the optimal mechanism discriminates against the informationally advantaged bidder. It can be implemented via a two-stage 'qualifying auction'. In the first stage, non-binding bids are submitted to determine who enters the second stage, which consists of a standard second-price auction augmented with a reserve price.
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