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Uniform price auctions with a last accepted bid pricing rule

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  • Burkett, Justin
  • Woodward, Kyle

Abstract

We model multi-unit auctions in which bidders' valuations are multidimensional private information. Under a natural constraint on aggregate demand we show that the last accepted bid uniform-pricing rule admits a unique equilibrium with a simple characterization: bids are identical to those submitted in a single-unit first price auction. The form of equilibrium bids suggests that last accepted bid uniform-pricing is a generalization of single-unit first-pricing: in both auctions winners pay the highest market clearing price. Contrasting the separating equilibrium of the last accepted bid auction, we show that equilibrium bids in pay as bid and first rejected bid uniform price auctions must pool information. Thus other common multi-unit auction formats cannot generalize single-unit first-pricing, in which equilibria do not pool information. The existence of a unique equilibrium implies that price selection may be an additional tool for avoiding the zero-revenue equilibria which exist in the first rejected bid uniform price auction. Finally, we show that equilibrium bids in our private information model are significantly flatter than in an analogous random supply model, suggesting that uniform price auction bids may not be as steep as commonly believed.

Suggested Citation

  • Burkett, Justin & Woodward, Kyle, 2020. "Uniform price auctions with a last accepted bid pricing rule," Journal of Economic Theory, Elsevier, vol. 185(C).
  • Handle: RePEc:eee:jetheo:v:185:y:2020:i:c:s0022053119301048
    DOI: 10.1016/j.jet.2019.104954
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    Cited by:

    1. Burkett, Justin & Woodward, Kyle, 2020. "Reserve prices eliminate low revenue equilibria in uniform price auctions," Games and Economic Behavior, Elsevier, vol. 121(C), pages 297-306.
    2. Cumpston, Anne & Khezr, Peyman, 2020. "Multi-Unit Auctions: A Survey of Theoretical Literature," MPRA Paper 101336, University Library of Munich, Germany.
    3. Loertscher, Simon & Mezzetti, Claudio, 2020. "A Dominant Strategy, Double Clock Auction with Estimation-Based Tatonnement," The Warwick Economics Research Paper Series (TWERPS) 1249, University of Warwick, Department of Economics.
    4. Toshihiro Tsuchihashi, 2021. "A buyout option alleviates implicit collusion in uniform‐price auctions," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(5), pages 1146-1155, July.

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    More about this item

    Keywords

    Multi-unit auctions; Uniform pricing; First price auctions;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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