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Affiliation in Multi-Unit Discriminatory Auctions

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  • Ahmed Anwar

Abstract

We extend Milgrom and Weber's affiliated valuations model to the multi-unit case with constant marginal valuations where 2 bidders compete for k identical objects. We show that the discriminatory auction has a unique equilibrium, that corresponds to Milgrom and Weber's first price equilibrium. This unique equilibrium therefore leads to lower expected prices than the equilibrium of the English auction where the units are bundled together. Hence we show that in a common value auction of a single object where the object can be divided into k parts, it is not possible to increase revenue by using a multi-unit discriminatory auction. We discuss a possible application to Treasury auctions.

Suggested Citation

  • Ahmed Anwar, 2000. "Affiliation in Multi-Unit Discriminatory Auctions," Edinburgh School of Economics Discussion Paper Series 58, Edinburgh School of Economics, University of Edinburgh.
    • Handle: RePEc:edn:esedps:58
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    File URL: http://www.econ.ed.ac.uk/papers/id58_esedps.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    affiliated valuations; multi-unit auctions; treasury auctions;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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