Government revenue at risk in auctions due to product market competition.
The article explores how competition in the product market affects different types of auctions. In the English auction, bidders adjust their bids based on their beliefs about rivals' costs, leading to lower expected revenue for the government compared to sealed auctions. In intense Bertrand competition, most bidders drop out early, resulting in minimal revenue for the government. Overall, the government earns less revenue in a Bertrand market compared to a Cournot market.