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Large multi-unit auctions with a large bidder

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  • Baisa, Brian
  • Burkett, Justin

Abstract

We compare equilibrium bidding in uniform-price and discriminatory auctions when a single large bidder (i.e., with multi-unit demand) competes against many small bidders, each with single-unit demands. We show that the large bidder prefers the discriminatory auction over the uniform-price auction, and we provide general conditions under which small bidders have the reverse preference. We use examples to show that the efficiency and revenue rankings of the two auctions are ambiguous.

Suggested Citation

  • Baisa, Brian & Burkett, Justin, 2018. "Large multi-unit auctions with a large bidder," Journal of Economic Theory, Elsevier, vol. 174(C), pages 1-15.
    • Handle: RePEc:eee:jetheo:v:174:y:2018:i:c:p:1-15
    DOI: 10.1016/j.jet.2017.11.010
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    References listed on IDEAS

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    1. Xavier Vives, 2011. "Strategic Supply Function Competition With Private Information," Econometrica, Econometric Society, vol. 79(6), pages 1919-1966, November.
    2. Jeroen M. Swinkels, 1999. "Asymptotic Efficiency for Discriminatory Private Value Auctions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(3), pages 509-528.
    3. Lawrence M. Ausubel & Peter Cramton & Marek Pycia & Marzena Rostek & Marek Weretka, 2014. "Demand Reduction and Inefficiency in Multi-Unit Auctions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(4), pages 1366-1400.
    4. Eric Maskin & John Riley, 2000. "Asymmetric Auctions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(3), pages 413-438.
    5. Jaime F. Zender & James J.D. Wang, 2002. "Auctioning divisible goods," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 19(4), pages 673-705.
    6. Back, Kerry & Zender, Jaime F, 1993. "Auctions of Divisible Goods: On the Rationale for the Treasury Experiment," The Review of Financial Studies, Society for Financial Studies, vol. 6(4), pages 733-764.
    7. Kirkegaard, René, 2009. "Asymmetric first price auctions," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1617-1635, July.
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    Citations

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    Cited by:

    1. Simon Finster, 2020. "Strategic Bidding in Product-Mix, Sequential, and Simultaneous Auctions," Economics Papers 2020-W03, Economics Group, Nuffield College, University of Oxford.
    2. Baisa, Brian & Burkett, Justin, 2020. "Discriminatory price auctions with resale and optimal quantity caps," Theoretical Economics, Econometric Society, vol. 15(1), January.
    3. Kirkegaard, René, 2021. "Ranking reversals in asymmetric auctions," Journal of Mathematical Economics, Elsevier, vol. 95(C).
    4. Qunwei Wang & Cheng Cheng & Dequn Zhou, 2020. "Multi-round auctions in an emissions trading system considering firm bidding strategies and government regulations," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 25(7), pages 1403-1421, October.
    5. Khezr, Peyman & Pourkhanali, Armin, 2023. "An investigation of auctions in the Regional Greenhouse Gas Initiative," MPRA Paper 118120, University Library of Munich, Germany.
    6. Cumpston, Anne & Khezr, Peyman, 2020. "Multi-Unit Auctions: A Survey of Theoretical Literature," MPRA Paper 101336, University Library of Munich, Germany.
    7. Thomas Kittsteiner & Marion Ott & Richard Steinberg, 2022. "Competing Combinatorial Auctions," Information Systems Research, INFORMS, vol. 33(4), pages 1130-1137, December.
    8. Kirkegaard, René, 2022. "Efficiency in asymmetric auctions with endogenous reserve prices," Games and Economic Behavior, Elsevier, vol. 132(C), pages 234-239.

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    More about this item

    Keywords

    Auctions; Multi-unit auctions; Market power; Large auctions; Asymmetric first price auctions;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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