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Menu Auctions with Demand Uncertainty

Author

Listed:
  • Kala Krishna

    (Pennsylvania State University)

  • Torben Tranæs

    (Danish National Institute of Social Research)

Abstract

We apply a Bernheim-Whinston (1986) type mechanism to a situation where a single buyer with uncertain demand wishes to buy from a small number of suppliers. We let suppliers bid a payment contingent on own quantity supplied, and another payment contingent on the realization of total demand. We show that there is a unique equilibrium which is also efficient. This equilibrium is equivalent to the one under the ‘truthful bids’ restriction used in the model without uncertainty in Bernheim-Whinston (1986).

Suggested Citation

  • Kala Krishna & Torben Tranæs, 2003. "Menu Auctions with Demand Uncertainty," Discussion Papers 03-14, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:0314
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    File URL: http://www.econ.ku.dk/english/research/publications/wp/2003/0314.pdf/
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    References listed on IDEAS

    as
    1. Tranaes, Torben, 1993. "Decision-making by an authority under influence," Economics Letters, Elsevier, vol. 43(1), pages 35-39.
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      More about this item

      Keywords

      procurement; efficient auctions; multi unit auctions; uniqueness;
      All these keywords.

      JEL classification:

      • D4 - Microeconomics - - Market Structure, Pricing, and Design
      • L5 - Industrial Organization - - Regulation and Industrial Policy
      • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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