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Multiunit Auctions in Which Almost Every Bid Wins

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  • Richard Engelbrecht‐Wiggans
  • Charles M. Kahn

Abstract

We consider multiunit auctions in which there are enough units so that each bidder but one wins every unit on which he bids. We characterize the equilibrium bidding strategy for three different payment rules: the pay‐your‐bid auction, the uniform‐price auction in which the price equals the lowest winning bid, and the uniform‐price auction in which the price equals the highest losing bid. We also consider the Vickrey pricing rule. In the case we examine, the auctions are all efficient and thus are revenue equivalent. The equilibria illustrate several phenomona that cannot arise in single‐unit auctions. Even though the auctions are expected‐revenue equivalent, different bidders may end up paying very different amounts. Also, in contrast to single‐unit auctions, changing the seller's reservation price affects revenues, even if it remains below the lowest possible value to bidders.

Suggested Citation

  • Richard Engelbrecht‐Wiggans & Charles M. Kahn, 2002. "Multiunit Auctions in Which Almost Every Bid Wins," Southern Economic Journal, John Wiley & Sons, vol. 68(3), pages 617-631, January.
    • Handle: RePEc:wly:soecon:v:68:y:2002:i:3:p:617-631
    DOI: 10.1002/j.2325-8012.2002.tb00441.x
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    References listed on IDEAS

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    1. 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.
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    4. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
    5. Jeroen M. Swinkels & Wolfgang Pesendorfer, 2000. "Efficiency and Information Aggregation in Auctions," American Economic Review, American Economic Association, vol. 90(3), pages 499-525, June.
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    Cited by:

    1. Pycia, Marek & Woodward, Kyle, 2021. "Auctions of Homogeneous Goods: A Case for Pay-as-Bid," CEPR Discussion Papers 15656, C.E.P.R. Discussion Papers.

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