Veronika Grimm () (Universidad de Alicante) Jürgen Bierbaum (Humboldt-Universität Berlin, Institut für Wirtschaftstheorie)
Abstract
We analyze the problem of selling shares of a divisible good to a large number of buyers when demand is uncertain. We characterize equilibria of two popular mechanisms, a fixed price mechanism and a uniform price auction, and compare the revenues. While in the auction truthful bidding is a dominant strategy, we find that bidders have an incentive to overstate their demand in the fixed price mechanism. For some parameter values this yields the surprising result that the fixed price mechanism outperforms the auction.
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Publisher Info
Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number
2004-08.