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Tilting the Supply Schedule to Enhance Competition on Uniform-Price Auctions

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Listed author(s):
  • Marco LiCalz
  • Alessandro Pavan

Abstract

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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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1495.

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Date of creation: Nov 2002
Handle: RePEc:nwu:cmsems:1495
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Keywords: uniform-price auction; divisible good; strategic role of the seller; endogenous supply; Treasury and IPO auctions;

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Find related papers by JEL classification:
  • D4 - Microeconomics - - Market Structure, Pricing, and Design
  • 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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