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Interconnected pay-as-bid auctions

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  • Wittwer, Milena

Abstract

I develop a framework to study common situations, in which substitute goods are sold in separate, good-specific multi-unit (pay-as-bid) auctions. I characterize bidding behavior and investigate auction design features that could increase revenues. The setting I develop gives rise to an essentially unique symmetric Nash equilibrium in which bidders shade their bids more strongly when goods are close substitutes. To increase revenues, the seller can offer total supply quantities that are (stochastically) unequal in size. This fosters more aggressive bidding and provides a rationale to hold separate, parallel auctions instead of selling all in one auction.

Suggested Citation

  • Wittwer, Milena, 2020. "Interconnected pay-as-bid auctions," Games and Economic Behavior, Elsevier, vol. 121(C), pages 506-530.
  • Handle: RePEc:eee:gamebe:v:121:y:2020:i:c:p:506-530
    DOI: 10.1016/j.geb.2020.03.009
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    References listed on IDEAS

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    Cited by:

    1. Jason Allen & Milena Wittwer, 2021. "Centralizing Over-the-Counter Markets?," Staff Working Papers 21-39, Bank of Canada.
    2. Jason Allen & Jakub Kastl & Milena Wittwer, 2020. "Primary Dealers and the Demand for Government Debt," Staff Working Papers 20-29, Bank of Canada.

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    More about this item

    Keywords

    Multi-unit auctions; Divisible goods; Aggregate uncertainty; Substitutes;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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