Auctions with Variable Supply: Uniform Price versus Discriminatory

Damianov, D.S.; Becker, J.G.

Abstract

We examine an auction in which the seller determines the supply after observing the bids. We compare the uniform price and the discriminatory auction in a setting of supply uncertainty, where uncertainty is caused by the interplay of two factors: the seller's private information about marginal cost and the seller's incentive to sell the profit-maximizing quantity, given the received bids. In every symmetric mixed strategy equilibrium, bidders submit higher bids in the uniform price auction than in the discriminatory auction. In the two-bidder case, this result extends to the set of rationalizable strategies. As a consequence, we find that the uniform price auction generates a higher expected revenue for the seller and a higher trade volume.

Citation

Damianov, D., & Becker, J. (2010). Auctions with Variable Supply: Uniform Price versus Discriminatory. European Economic Review, 54(4), 571-593. https://doi.org/10.1016/j.euroecorev.2009.09.002

• Journal Article Type: Article
• Publication Date: 2010-05
• Deposit Date: Aug 27, 2013
• Journal: European Economic Review
• Print ISSN: 0014-2921
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 54
• Issue: 4
• Pages: 571-593
• DOI: https://doi.org/10.1016/j.euroecorev.2009.09.002
• Keywords: Sealed bid multi-unit auctions; Variable supply auctions; Discriminatory and uniform price auctions;Subgame perfect equilibria; Rationalizable strategies
• Public URL: https://durham-repository.worktribe.com/output/1479330