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Vickrey Auctions with Reserve Pricing

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Abstract

We generalize the Vickrey auction to allow for reserve pricing in a multiple item auction with interdependent values. By withholding quantity in some circumstances, the seller can improve revenues or mitigate collusion. In the Vickrey auction with reserve pricing, the seller determines the quantity to be made available as a function of the bidders' private information, and then efficiently allocates this quantity among the bidders. Truthful bidding is a dominant strategy with private values and an ex post equilibrium with interdependent values. If the auction is followed by resale, then truthful bidding remains an equilibrium in the auction-plus-resale game. In settings where resale exhausts all the gains from trade among the bidders, the Vickrey auction with reserve pricing maximizes seller revenues.

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File URL: http://www.cramton.umd.edu/papers1995-1999/99wp-vickrey-auctions-with-reserve-pricing.pdf
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Bibliographic Info

Paper provided by University of Maryland, Department of Economics - Peter Cramton in its series Papers of Peter Cramton with number 99wpvic.

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Length: 13 pages
Date of creation: 2004
Date of revision: 28 Jun 1999
Publication status: Published in Economic Theory, 23, 493-505, April 2004. Reprinted in Charalambos Aliprantis, et al. (eds.), Assets, Beliefs, and Equilibria in Economic Dynamics, Berlin: Springer-Verlag, 355-368, 2003.
Handle: RePEc:pcc:pccumd:99wpvic

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Postal: Economics Department, University of Maryland, College Park, MD 20742-7211
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Web page: http://www.cramton.umd.edu

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Keywords: Auctions; Vickrey Auctions; Multiple Item Auctions; Resale;

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References

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  1. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, American Finance Association, vol. 16(1), pages 8-37, 03.
  2. Yvan Lengwiler, 1998. "The multiple unit auction with variable supply," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 1998-28, Board of Governors of the Federal Reserve System (U.S.).
  3. John McMillan, 1994. "Selling Spectrum Rights," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 8(3), pages 145-162, Summer.
  4. Partha Dasgupta & Eric Maskin, 2000. "Efficient Auctions," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 115(2), pages 341-388, May.
  5. Back, Kerry & Zender, Jaime F, 1993. "Auctions of Divisible Goods: On the Rationale for the Treasury Experiment," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 6(4), pages 733-64.
  6. Lawrence M. Ausubel & Peter Cramton, 1995. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Papers of Peter Cramton, University of Maryland, Department of Economics - Peter Cramton 98wpdr, University of Maryland, Department of Economics - Peter Cramton, revised 22 Jul 2002.
  7. Lawrence M. Ausubel & Peter Cramton, 1998. "The Optimality of Being Efficient," Papers of Peter Cramton, University of Maryland, Department of Economics - Peter Cramton 98wpoe, University of Maryland, Department of Economics - Peter Cramton, revised 18 Jun 1999.
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Citations

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Cited by:
  1. M. Yenmez, 2014. "Pricing in position auctions and online advertising," Economic Theory, Springer, Springer, vol. 55(1), pages 243-256, January.
  2. Lawrence M. Ausubel & Peter Cramton, 1998. "The Optimality of Being Efficient," Papers of Peter Cramton, University of Maryland, Department of Economics - Peter Cramton 98wpoe, University of Maryland, Department of Economics - Peter Cramton, revised 18 Jun 1999.
  3. Lawrence M. Ausubel & Peter Cramton, 2004. "Auctioning Many Divisible Goods," Journal of the European Economic Association, MIT Press, MIT Press, vol. 2(2-3), pages 480-493, 04/05.
  4. Subir Bose & George Deltas, 2007. "Exclusive Versus Non-exclusive Dealing in Auctions with Resale," Economic Theory, Springer, Springer, vol. 31(1), pages 1-17, April.
  5. Burtraw, Dallas & Palmer, Karen & Kahn, Danny, 2010. "A symmetric safety valve," Energy Policy, Elsevier, Elsevier, vol. 38(9), pages 4921-4932, September.
  6. Ollikka, Kimmo & Tukiainen , Janne, 2013. "Central bank liquidity auction mechanism design and the interbank market," Research Discussion Papers, Bank of Finland 21/2013, Bank of Finland.
  7. Sara Castellanos, 2001. "Mexican treasury securities primary auctions," Theory workshop papers, UCLA Department of Economics 357966000000000025, UCLA Department of Economics.
  8. Hiroki Saitoh & Shigehiro Serizawa, 2008. "Vickrey allocation rule with income effect," Economic Theory, Springer, Springer, vol. 35(2), pages 391-401, May.
  9. O'Mahoney, Amy & Denny, Eleanor, 2011. "Electricity Prices and Generator Behaviour in Gross Pool Electricity Markets," MPRA Paper 34847, University Library of Munich, Germany.
  10. Ning Sun & Zaifu Yang, 2014. "An Efficient and Incentive Compatible Dynamic Auction for Multiple Complements," Discussion Papers, Department of Economics, University of York 14/06, Department of Economics, University of York.
  11. Natalia Fabra & Nils‐Henrik Fehr & David Harbord, 2006. "Designing electricity auctions," RAND Journal of Economics, RAND Corporation, RAND Corporation, vol. 37(1), pages 23-46, 03.
  12. Longstaff, Francis A & Han, Bing & Merrill, Craig, 2004. "Revenue Implications of Multi-Item Multi-Unit Auction Designs: Empirical Evidence from the U.S. Treasury Buyback Auctions," University of California at Los Angeles, Anderson Graduate School of Management, Anderson Graduate School of Management, UCLA qt7344v866, Anderson Graduate School of Management, UCLA.
  13. Lawrence Ausubel, 2000. "A Generalized Vickrey Auction," Econometric Society World Congress 2000 Contributed Papers, Econometric Society 1257, Econometric Society.
  14. Lawrence M. Ausubel, 2006. "An Efficient Dynamic Auction for Heterogeneous Commodities," American Economic Review, American Economic Association, American Economic Association, vol. 96(3), pages 602-629, June.
  15. Andrés Pereyra, 2001. "Subasta de telefonía móvil: ¿una experiencia inconclusa en Uruguay?," Documentos de Trabajo (working papers), Department of Economics - dECON 0302, Department of Economics - dECON.
  16. Anabela Botelho & Lígia M.Costa Pinto & Eduarda Fernandes, 2013. "More on the dynamic Vickrey mechanism for multi-unit auctions: an experimental study on the emission permits initial auction," NIMA Working Papers, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho 53, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
  17. Sara Castellanos, 2001. "A New Empirical Study of the Mexican Treasury Securities Primary Auctions: Is there more underpricing?," Levine's Working Paper Archive 625018000000000206, David K. Levine.
  18. Neeman, Zvika & Pavlov, Gregory, 2013. "Ex post renegotiation-proof mechanism design," Journal of Economic Theory, Elsevier, Elsevier, vol. 148(2), pages 473-501.

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