Auctions with Variable Supply: Uniform Price versus Discriminatory

Damian Damianov and Johannes Gerd Becker ()
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Johannes Gerd Becker: CER-ETH - Center of Economic Research at ETH Zurich, Switzerland

No 08/80, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

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. 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 higher expected revenue for the seller and 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)
JEL-codes: D44 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2008-02
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Auctions with variable supply: Uniform price versus discriminatory (2010)
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