Working Papers, Swedish National Road & Transport Research Institute (VTI)
No 2008:9:
Revenues in Discrete Multi-Unit, Common Value Auctions: A Study of Three Sealed-Bid Mechanisms
Joakim Ahlberg ()
Abstract: 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.
Keywords: Multi-Unit Auction; Common Value Auction; Discrete Auction; Game Theory; (follow links to similar papers)
JEL-Codes: C72; D44; (follow links to similar papers)
21 pages, September 10, 2008
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