The multiple unit auction with variable supply |
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Authors: | Yvan Lengwiler |
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Institution: | (1) Board of Governors of the Federal Reserve System, Division of Monetary Affairs, Mail Stop 71, Washington, DC 20551, USA , US;(2) Swiss National Bank, P.O. Box, CH–8022 Zürich, SWITZERLAND (e-mail: yle@altavista.net) , CH |
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Abstract: | Summary. 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.
Received: June 18, 1998; revised version: January 13, 1999 |
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Keywords: | and Phrases:Multiple unit auction Uniform price Price discrimination |
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