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Multi-unit auctions with private information: an indivisible unit continuous price model

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  • Francisco Alvarez

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  • Cristina Mazón

    ()

Abstract

We construct a model of multi-unit auctions in which I bidders bid for two indivisible units of a common value good. Using a first-order approach, we find that there are equilibria in which bidders bid the same price for both units in the discriminatory auction, but not in the uniform auction. When there are only two bidders, under certain conditions, there are linear equilibria for both the discriminatory and the uniform auction formats. In all equilibria, bidders equalize the expected marginal benefit of bidding to the marginal costs of bidding. We show that comparison of the seller’s expected revenue across auction formats depends only on the ratio of the precision of private information to the precision of public information. Copyright Springer-Verlag 2012

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File URL: http://hdl.handle.net/10.1007/s00199-010-0594-2
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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 51 (2012)
Issue (Month): 1 (September)
Pages: 35-70

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Handle: RePEc:spr:joecth:v:51:y:2012:i:1:p:35-70

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Web page: http://link.springer.de/link/service/journals/00199/index.htm

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Related research

Keywords: Multi-unit auctions; Indivisible good auctions; Treasury auctions; D44;

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References

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  1. Indranil Chakraborty, 2006. "Characterization of equilibrium in pay-as-bid auctions for multiple units," Economic Theory, Springer, vol. 29(1), pages 197-211, September.
  2. Brenner, Menachem & Galai, Dan & Sade, Orly, 2009. "Sovereign debt auctions: Uniform or discriminatory?," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 267-274, March.
  3. Noussair, C.N., 1995. "Equilibria in a multi-object uniform price sealed bid auction with multi-unit demands," Open Access publications from Tilburg University urn:nbn:nl:ui:12-381122, Tilburg University.
  4. Jaime F. Zender & James J.D. Wang, 2002. "Auctioning divisible goods," Economic Theory, Springer, vol. 19(4), pages 673-705.
  5. Wilson, Robert, 1979. "Auctions of Shares," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 675-89, November.
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Cited by:
  1. Francisco Alvarez & Francisco J. André, 2013. "Auctioning vs. Grandfathering in Cap-and-Trade Systems with Market Power and Incomplete Information," Working Papers 2013.98, Fondazione Eni Enrico Mattei.

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