Revenues in Discrete Multi-Unit, Common Value Auctions: A Study of Three Sealed-Bid Mechanisms
AbstractWe propose in this paper a discrete bidding model, both on quantities and in pricing. It has a two-unit demand environment where subjects bid for contracts with an unknown redemption value, common to all bidders. Prior to bidding, the bidders receive private signals of information on the (common) value. Both the value and the signals are drawn from a known discrete affiliated joint distribution. The relevant task for the paper is to compare equilibrium strategies and the seller's revenue between the three auction formats. We find that, among the three auction formats below with two players, the Vickrey auction always gives the most revenue to the seller, where the discriminatory auction becomes second and the uniform auction last. We also find that, in equilibrium, bidders bid the same amount on both items in the discriminatory auction; a phenomenon we do not notice in either of the other two auction formats. There, different amount of demand reduction is encountered.
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Bibliographic InfoPaper provided by Swedish National Road & Transport Research Institute (VTI) in its series Working Papers with number 2008:9.
Length: 21 pages
Date of creation: 10 Sep 2008
Date of revision:
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Phone: +46-13-20 40 00
Fax: +46-13-14 14 36
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Multi-Unit Auction; Common Value Auction; Discrete Auction; Game Theory;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-20 (All new papers)
- NEP-CTA-2008-09-20 (Contract Theory & Applications)
- NEP-GTH-2008-09-20 (Game Theory)
- NEP-MIC-2008-09-20 (Microeconomics)
- NEP-MKT-2008-09-20 (Marketing)
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