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Tilting the supply schedule to enhance competition in uniform-price auctions

  • LiCalzi, Marco
  • Pavan, Alessandro

Uniform-price auctions of a divisible good in fixed supply admit underpricing equilibria, where bidders submit high inframarginal bids to prevent competition on prices. The seller can obstruct this behavior by tilting her supply schedule and making the amount of divisible good on offer change endogenously with its (uniform) price. Precommitting to an increasing supply curve is a strategic instrument to reward aggressive bidding and enhance expected revenue. A fixed supply may not be optimal even when accounting for the cost to the seller of issuing a quantity different from her target supply.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 49 (2005)
Issue (Month): 1 (January)
Pages: 227-250

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Handle: RePEc:eee:eecrev:v:49:y:2005:i:1:p:227-250
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

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