The multiple unit auction with variable supply
The theory of multiple unit auctions traditionally assumes that the offered quantity is fixed. I argue that this assumption is not appropriate for many applications because the seller may be able and willing to adjust the supply as a function of the bidding. In this paper I address this shortcoming by analyzing a multi-unit auction game between a monopolistic seller who can produce arbitrary quantities at constant unit cost, and oligopolistic bidders. I establish the existence of a subgame-perfect equilibrium for price discriminating and for uniform price auctions. I also show that bidders have an incentive to misreport their true demand in both auction formats, but they do that in different ways and for different reasons. Furthermore, both auction formats are inefficient, but there is no unambiguous ordering among them. Finally, the more competitive the bidders are, the more likely the seller is to prefer uniform pricing over price discrimination, yet increased competition among bidders may or may not enhance efficiency.
Volume (Year): 14 (1999)
Issue (Month): 2 ()
|Note:||Received: June 18, 1998; revised version: January 13, 1999|
|Contact details of provider:|| Web page: http://www.springer.com|
|Order Information:||Web: http://www.springer.com/economics/economic+theory/journal/199/PS2|
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- Nautz, D., 1995. "Optimal bidding in multi-unit auctions with many bidders," Economics Letters, Elsevier, vol. 48(3-4), pages 301-306, June.
- Tenorio, Rafael, 1997. "On Strategic Quantity Bidding in Multiple Unit Auctions," Journal of Industrial Economics, Wiley Blackwell, vol. 45(2), pages 207-217, June.
- Lawrence M. Ausubel & Peter Cramton & Marek Pycia & Marzena Rostek & Marek Weretka, 2014.
"Demand Reduction and Inefficiency in Multi-Unit Auctions,"
Review of Economic Studies,
Oxford University Press, vol. 81(4), pages 1366-1400.
- Lawrence M. Ausubel & Peter Cramton, 1995. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Papers of Peter Cramton 98wpdr, University of Maryland, Department of Economics - Peter Cramton, revised 22 Jul 2002.
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- Nautz, D. & Wolfstetter, E., 1997. "Bid shading and risk aversion in multi-unit auctions with many bidders," Economics Letters, Elsevier, vol. 56(2), pages 195-200, October.
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- Draaisma, Teun & Noussair, Charles, 1997. "Optimal bidding in a uniform price auction with multi-unit demand1," Economics Letters, Elsevier, vol. 56(2), pages 157-162, October.
- Robert G. Hansen, 1988. "Auctions with Endogenous Quantity," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 44-58, Spring.
- Hans Haller & Yvan Lengwiler, 1998. "A discrete model of discriminatory price auctions - an alternative to Menezes-Monteiro," Finance and Economics Discussion Series 1998-08, Board of Governors of the Federal Reserve System (U.S.).
- 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.
- Noussair, Charles, 1995. "Equilibria in a Multi-object Uniform Price Sealed Bid Auction with Multi-unit Demands," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 5(2), pages 337-351, March.
- 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, vol. 6(4), pages 733-764. Full references (including those not matched with items on IDEAS)
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