Tilting the supply schedule to enhance competition in uniform-price auctions

Marco LiCalzi, Alessandro Pavan*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

35 Scopus citations

Abstract

Uniform-price auctions of a divisible good in fixed supply admit underpricing equilibria, where bidders submit high inframarginal bids to prevent competition on prices. The seller can obstruct this behavior by tilting her supply schedule and making the amount of divisible good on offer change endogenously with its (uniform) price. Precommitting to an increasing supply curve is a strategic instrument to reward aggressive bidding and enhance expected revenue. A fixed supply may not be optimal even when accounting for the cost to the seller of issuing a quantity different from her target supply.

Original languageEnglish (US)
Pages (from-to)227-250
Number of pages24
JournalEuropean Economic Review
Volume49
Issue number1
DOIs
StatePublished - Jan 2005

Keywords

  • Divisible good
  • Endogenous supply
  • Strategic role of the seller
  • Treasury and IPO auctions
  • Uniform-price auction

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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