This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Demand Reduction and Inefficiency in Multi-Unit Auctions

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Lawrence M. Ausubel () (Economics Department, University of Maryland)
Peter Cramton () (Economics Department, University of Maryland)

Additional information is available for the following registered author(s):

Abstract

Auctions typically involve the sale of many related goods. The FCC spectrum auctions and the Treasury debt auctions are examples. With conventional auction designs, large bidders have an incentive to reduce demand in order to pay less for their winnings. This incentive creates an inefficiency in multi-unit auctions. Large bidders reduce demand for additional units and so sometimes lose to smaller bidders with lower values. We demonstrate this inefficiency in several auction settings: flat demand and downward-sloping demand, independent private values and correlated values, and uniform pricing and pay-your-bid pricing. We also establish that the ranking of the uniform-price and pay-your-bid auctions is ambiguous. We show how a Vickrey auction avoids this inefficiency and how the Vickrey auction can be implemented with a simultaneous, ascending-bid design (Ausubel 1997). Bidding behavior in the FCC spectrum auctions illustrates the incentives for demand reduction and the associated inefficiency.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cramton.umd.edu/papers1995-1999/98wp-demand-reduction.pdf
File Format: application/pdf
File Function: Full text
Download Restriction: no

Publisher Info
Paper provided by University of Maryland, Department of Economics - Peter Cramton in its series Papers of Peter Cramton with number 98wpdr.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length: 31 pages
Date of creation: 08 Nov 1995
Date of revision: 22 Jul 2002
Handle: RePEc:pcc:pccumd:98wpdr

Note: Working Paper
Contact details of provider:
Postal: Economics Department, University of Maryland, College Park, MD 20742-7211
Phone: (202) 318-0520
Fax: (202) 318-0520
Web page: http://www.cramton.umd.edu

For technical questions regarding this item, or to correct its listing, contact: (Peter Cramton).

Related research
Keywords: Auctions Multi-Unit Auctions Spectrum Auctions Treasury Auctions

Other versions of this item:

Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions

References listed on IDEAS
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.:

  1. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June. [Downloadable!] (restricted)
  2. Peter Cramton, 1997. "The FCC Spectrum Auctions: An Early Assessment," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 6(3), pages 431-495, 09. [Downloadable!] (restricted)
    Other versions:
  3. Harstad, Ronald M., 1993. "Auctions With Endogenous Bidder Participation," Discussion Paper Serie B 251, University of Bonn, Germany.
  4. Anton, James J & Yao, Dennis A, 1992. "Coordination in Split Award Auctions," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 681-707, May. [Downloadable!] (restricted)
  5. Lawrence M. Ausubel & Peter Cramton, 1997. "Auctioning Securities," Papers of Peter Cramton 98wpas, University of Maryland, Department of Economics - Peter Cramton, revised Mar 1998. [Downloadable!]
  6. Bikhchandani, Sushil, 1999. "Auctions of Heterogeneous Objects," Games and Economic Behavior, Elsevier, vol. 26(2), pages 193-220, January. [Downloadable!] (restricted)
  7. Cramton, Peter C, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 4(2), pages 267-343, Summer.
    Other versions:
  8. Rothkopf, Michael H & Teisberg, Thomas J & Kahn, Edward P, 1990. "Why Are Vickrey Auctions Rare?," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 94-109, February. [Downloadable!] (restricted)
  9. Harstad, Ronald M, 1990. "Alternative Common-Value Auction Procedures: Revenue Comparisons with Free Entry," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 421-29, April. [Downloadable!] (restricted)
  10. Bikhchandani, Sushil & Mamer, John W., 1997. "Competitive Equilibrium in an Exchange Economy with Indivisibilities," Journal of Economic Theory, Elsevier, vol. 74(2), pages 385-413, June. [Downloadable!] (restricted)
  11. McMillan, John, 1994. "Selling Spectrum Rights," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 145-62, Summer. [Downloadable!] (restricted)
  12. V.V. Chari & Robert J. Weber, 1992. "How the U.S. Treasury should auction its debt," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 3-12. [Downloadable!]
  13. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law & Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
  14. Riley, John G & Samuelson, William F, 1981. "Optimal Auctions," American Economic Review, American Economic Association, vol. 71(3), pages 381-92, June. [Downloadable!] (restricted)
    Other versions:
  15. Noussair, Charles, 1995. "Equilibria in a Multi-object Uniform Price Sealed Bid Auction with Multi-unit Demands," Economic Theory, Springer, vol. 5(2), pages 337-51, March.
  16. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June. [Downloadable!] (restricted)
  17. Wilson, Robert, 1979. "Auctions of Shares," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 675-89, November. [Downloadable!] (restricted)
  18. Robert J. Weber, 1981. "Multiple-Object Auctions," Discussion Papers 496, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  19. Levin, Dan & Smith, James L, 1996. "Optimal Reservation Prices in Auctions," Economic Journal, Royal Economic Society, vol. 106(438), pages 1271-83, September. [Downloadable!] (restricted)
  20. McAfee, R Preston & McMillan, John, 1996. "Analyzing the Airwaves Auction," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 159-75, Winter. [Downloadable!] (restricted)
  21. Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-55, December. [Downloadable!] (restricted)
  22. Back, Kerry & Zender, Jaime F, 1993. "Auctions of Divisible Goods: On the Rationale for the Treasury Experiment," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 6(4), pages 733-64. [Downloadable!] (restricted)
  23. Kelso, Alexander S, Jr & Crawford, Vincent P, 1982. "Job Matching, Coalition Formation, and Gross Substitutes," Econometrica, Econometric Society, vol. 50(6), pages 1483-1504, November. [Downloadable!] (restricted)
  24. Ashenfelter, Orley, 1989. "How Auctions Work for Wine and Art," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 23-36, Summer. [Downloadable!] (restricted)
  25. Harris, Milton & Raviv, Artur, 1981. "Allocation Mechanisms and the Design of Auctions," Econometrica, Econometric Society, vol. 49(6), pages 1477-99, November. [Downloadable!] (restricted)
  26. Engelbrecht-Wiggans, Richard, 1988. "Revenue equivalence in multi-object auctions," Economics Letters, Elsevier, vol. 26(1), pages 15-19. [Downloadable!] (restricted)
  27. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, 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.)
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.
Statistics
Access and download statistics

Did you know? RePEc stands for Research Papers in Economics.

This page was last updated on 2008-11-13.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.