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Uniform vs. Discriminatory Auctions with Variable Supply - Experimental Evidence

  • Damianov, Damian S.

    ()

    (The University of Texas-Pan American)

  • Oechssler, Jörg

    ()

    (Department of Economics, University of Heidelberg)

  • Becker, Johannes Gerd

    ()

    (ETH Zurich, Department of Economics)

In the variable supply auction considered here, the seller decides how many costumers with unit demand to serve after observing their bids. Bidders are uncertain about the seller's cost. We experimentally investigate whether a uniform or a discriminatory price auction is better for the seller in this setting. Exactly as predicted by theory, it turns out that the uniform price auction produces substantially higher bids, and consequently yields higher revenues and profits for the seller. Somewhat surprisingly but again predicted by theory, it also yields a higher number of transactions, which makes it the more efficient auction format.

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Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 07-68.

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Length: 31 pages
Date of creation: 05 Dec 2007
Date of revision:
Handle: RePEc:xrs:sfbmaa:07-68
Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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  1. Yvan Lengwiler, 1998. "The multiple unit auction with variable supply," Finance and Economics Discussion Series 1998-28, Board of Governors of the Federal Reserve System (U.S.).
  2. Kremer, Ilan & Nyborg, Kjell G, 2004. "Underpricing and Market Power in Uniform Price Auctions," CEPR Discussion Papers 4363, C.E.P.R. Discussion Papers.
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  6. Rassenti, Stephen J & Smith, Vernon L & Wilson, Bart J, 2003. "Discriminatory Price Auctions in Electricity Markets: Low Volatility at the Expense of High Price Levels," Journal of Regulatory Economics, Springer, vol. 23(2), pages 109-23, March.
  7. Timothy N. Cason & Lata Gangadharan, 2005. "A Laboratory Comparison of Uniform and Discriminative Price Auctions for Reducing Non-point Source Pollution," Land Economics, University of Wisconsin Press, vol. 81(1).
  8. Damianov, Damian S. & Becker, Johannes Gerd, 2010. "Auctions with variable supply: Uniform price versus discriminatory," European Economic Review, Elsevier, vol. 54(4), pages 571-593, May.
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