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Pro-Competitive Rationing in Multi-Unit Auctions

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Abstract

In multi-unit auctions, such as auctions of commodities and securities, and financial exchanges, it is necessary to specify rationing rules to break ties between multiple marginal bids. The standard approach in the literature and in practice is to ration marginal bids proportionally. This paper shows how bidding can be made more competitive if the rationing rule instead gives increasing priority to bidders with a small volume of marginal bids at clearing prices closer to the reservation price. In comparison to standard rationing, such a rule can have almost the same effect on the competitiveness of bids as a doubling of the number of bidders.

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  • Holmberg, Pär, 2014. "Pro-Competitive Rationing in Multi-Unit Auctions," Working Paper Series 1037, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:1037
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    1. Aliabadi, Danial Esmaeili & Kaya, Murat & Şahin, Güvenç, 2017. "An agent-based simulation of power generation company behavior in electricity markets under different market-clearing mechanisms," Energy Policy, Elsevier, vol. 100(C), pages 191-205.

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    More about this item

    Keywords

    C72; D44; D45;
    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
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing

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