Affliation in Multi-Unit Auctions
AbstractWe extend Milgrom and Weber’s affiliated valuations model to the multi-unit case with constant marginal valuations where 2 bidders compete for k identical objects. We show that the discriminatory auction has a unique equilibrium, that corresponds to Milgrom and Weber’s firstprice equilibrium. This unique equilibrium therefore leads to lower expected prices than the equilibrium of the English auction where the units are bundled together. Hence we show that in a common value auction of a single object where the object can be divided into k parts, it is not possible to increase revenue by using a multi-unit discriminatory auction. We discuss a possible application to Treasury auctions.
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Bibliographic InfoPaper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 58.
Date of creation: Apr 2004
Date of revision:
Affiliated Valuations; Multi-Unit Auctions; Treasury Auctions.;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-04-25 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Milgrom, Paul R & Weber, Robert J, 1982.
"A Theory of Auctions and Competitive Bidding,"
Econometric Society, vol. 50(5), pages 1089-1122, September.
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- Philip J. Reny, 1999. "On the Existence of Pure and Mixed Strategy Nash Equilibria in Discontinuous Games," Econometrica, Econometric Society, vol. 67(5), pages 1029-1056, September.
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- Wilson, Robert, 1979. "Auctions of Shares," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 675-89, November.
- Lizzeri, Alessandro & Persico, Nicola, 2000. "Uniqueness and Existence of Equilibrium in Auctions with a Reserve Price," Games and Economic Behavior, Elsevier, vol. 30(1), pages 83-114, January.
- S. Viswanathan & James J.D. Wang, 2004. "Optimal Bidding in Multi-Unit Discriminatory Auctions: Two Bidders," Econometric Society 2004 North American Winter Meetings 58, Econometric Society.
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