The multiple unit auction with variable supply

Yvan Lengwiler

Economic Theory, 1999, vol. 14, issue 2, 373-392

Abstract: The theory of multiple unit auctions traditionally assumes that the offered quantity is fixed. I argue that this assumption is not appropriate for many applications because the seller may be able and willing to adjust the supply as a function of the bidding. In this paper I address this shortcoming by analyzing a multi-unit auction game between a monopolistic seller who can produce arbitrary quantities at constant unit cost, and oligopolistic bidders. I establish the existence of a subgame-perfect equilibrium for price discriminating and for uniform price auctions. I also show that bidders have an incentive to misreport their true demand in both auction formats, but they do that in different ways and for different reasons. Furthermore, both auction formats are inefficient, but there is no unambiguous ordering among them. Finally, the more competitive the bidders are, the more likely the seller is to prefer uniform pricing over price discrimination, yet increased competition among bidders may or may not enhance efficiency.

Keywords: Multiple unit auction; Uniform price; Price discrimination. (search for similar items in EconPapers)
Date: 1999-08-24
Note: Received: June 18, 1998; revised version: January 13, 1999
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Citations: View citations in EconPapers (35)

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Working Paper: The multiple unit auction with variable supply (1998)
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