Auctions with variable supply: Uniform price versus discriminatory

Damian Damianov and Johannes Gerd Becker

European Economic Review, 2010, vol. 54, issue 4, 571-593

Abstract: 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.

Keywords: Sealed; bid; multi-unit; auctions; Variable; supply; auctions; Discriminatory; and; uniform; price; auctions; Subgame; perfect; equilibria; Rationalizable; strategies (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (20)

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Working Paper: Auctions with Variable Supply: Uniform Price versus Discriminatory (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:54:y:2010:i:4:p:571-593

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