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Auctions with variable supply: Uniform price versus discriminatory

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  • Damianov, Damian S.
  • Becker, Johannes Gerd

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.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 54 (2010)
Issue (Month): 4 (May)
Pages: 571-593

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Handle: RePEc:eee:eecrev:v:54:y:2010:i:4:p:571-593

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Web page: http://www.elsevier.com/locate/eer

Related research

Keywords: Sealed bid multi-unit auctions Variable supply auctions Discriminatory and uniform price auctions Subgame perfect equilibria Rationalizable strategies;

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References

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Citations

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Cited by:
  1. Damianov, Damian S. & Oechssler, Jörg & Becker, Johannes Gerd, 2010. "Uniform vs. discriminatory auctions with variable supply - experimental evidence," Games and Economic Behavior, Elsevier, vol. 68(1), pages 60-76, January.
  2. Edward J. Balistreri & Russell H. Hillberry & Thomas F. Rutherford, 2008. "Structural Estimation and Solution of International Trade Models with Heterogeneous Firms," Department of Economics - Working Papers Series 1056, The University of Melbourne.
  3. Balistreri, Edward J. & Hillberry, Russell H. & Rutherford, Thomas F., 2010. "Trade and welfare: Does industrial organization matter?," Economics Letters, Elsevier, vol. 109(2), pages 85-87, November.

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