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Revenues in Discrete Multi-Unit, Common Value Auctions: A Study of Three Sealed-Bid Mechanisms


  • Ahlberg, Joakim

    () (VTI)


We propose in this paper a discrete bidding model, both on quantities and in pricing. It has a two-unit demand environment where subjects bid for contracts with an unknown redemption value, common to all bidders. Prior to bidding, the bidders receive private signals of information on the (common) value. Both the value and the signals are drawn from a known discrete affiliated joint distribution. The relevant task for the paper is to compare equilibrium strategies and the seller's revenue between the three auction formats. We find that, among the three auction formats below with two players, the Vickrey auction always gives the most revenue to the seller, where the discriminatory auction becomes second and the uniform auction last. We also find that, in equilibrium, bidders bid the same amount on both items in the discriminatory auction; a phenomenon we do not notice in either of the other two auction formats. There, different amount of demand reduction is encountered.

Suggested Citation

  • Ahlberg, Joakim, 2008. "Revenues in Discrete Multi-Unit, Common Value Auctions: A Study of Three Sealed-Bid Mechanisms," Working Papers 2008:9, Swedish National Road & Transport Research Institute (VTI).
  • Handle: RePEc:hhs:vtiwps:2008_009

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    References listed on IDEAS

    1. Vredin Johansson, Maria & Heldt, Tobias & Johansson, Per, 2006. "The effects of attitudes and personality traits on mode choice," Transportation Research Part A: Policy and Practice, Elsevier, vol. 40(6), pages 507-525, July.
    2. Cameron,A. Colin & Trivedi,Pravin K., 2008. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9787111235767, March.
    3. Fosgerau, Mogens, 2006. "Investigating the distribution of the value of travel time savings," Transportation Research Part B: Methodological, Elsevier, vol. 40(8), pages 688-707, September.
    4. Cantillo, Víctor & Heydecker, Benjamin & de Dios Ortúzar, Juan, 2006. "A discrete choice model incorporating thresholds for perception in attribute values," Transportation Research Part B: Methodological, Elsevier, vol. 40(9), pages 807-825, November.
    5. Hensher, David A. & Goodwin, Phil, 2004. "Using values of travel time savings for toll roads: avoiding some common errors," Transport Policy, Elsevier, vol. 11(2), pages 171-181, April.
    6. Isacsson, Gunnar & Swärdh, Jan-Erik, 2007. "An empirical on-the-job search model with preferences for relative earnings: How high is the value of commuting time?," Working Papers 2007:12, Swedish National Road & Transport Research Institute (VTI).
    7. Wardman, Mark, 2004. "Public transport values of time," Transport Policy, Elsevier, vol. 11(4), pages 363-377, October.
    8. Mogens Fosgerau, 2005. "Unit income elasticity of the value of travel time savings," Urban/Regional 0508007, EconWPA.
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    More about this item


    Multi-Unit Auction; Common Value Auction; Discrete Auction; Game Theory;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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