Auctions with variable supply: Uniform price versus discriminatory
We examine an auction in which the seller determines the supply after observing the bids. We compare the uniform price and the discriminatory auction in a setting of supply uncertainty, where uncertainty is caused by the interplay of two factors: the seller's private information about marginal cost and the seller's incentive to sell the profit-maximizing quantity, given the received bids. In every symmetric mixed strategy equilibrium, bidders submit higher bids in the uniform price auction than in the discriminatory auction. In the two-bidder case, this result extends to the set of rationalizable strategies. As a consequence, we find that the uniform price auction generates a higher expected revenue for the seller and a higher trade volume.
Year of publication: |
2010
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Authors: | Damianov, Damian S. ; Becker, Johannes Gerd |
Published in: |
European Economic Review. - Elsevier, ISSN 0014-2921. - Vol. 54.2010, 4, p. 571-593
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Publisher: |
Elsevier |
Keywords: | Sealed bid multi-unit auctions Variable supply auctions Discriminatory and uniform price auctions Subgame perfect equilibria Rationalizable strategies |
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