Tilting the Supply Schedule to Enhance Competition in Uniform-Price Auctions

32 Pages Posted: 1 Apr 2003 Last revised: 3 Jun 2010

See all articles by Marco LiCalzi

Marco LiCalzi

Dept. Management, Università Ca' Foscari Venezia

Alessandro Pavan

Northwestern University

Date Written: January 2005

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.

Keywords: uniform-price auction, divisible good, strategic role of the seller, endogenous supply, Treasury and IPO auctions.

JEL Classification: D44, E58

Suggested Citation

LiCalzi, Marco and Pavan, Alessandro, Tilting the Supply Schedule to Enhance Competition in Uniform-Price Auctions (January 2005). EUROPEAN ECONOMIC REVIEW, Vol. 49, pp. 227-250, January 2005. Available at SSRN: https://ssrn.com/abstract=389542 or http://dx.doi.org/10.2139/ssrn.389542

Marco LiCalzi

Dept. Management, Università Ca' Foscari Venezia ( email )

San Giobbe, Cannaregio 873
Venice, 30121
Italy
+39-0412346925 (Phone)
+39-0412347444 (Fax)

HOME PAGE: http://venus.unive.it/licalzi/

Alessandro Pavan (Contact Author)

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208-2600
United States
847-491-8266 (Phone)
847-491-7001 (Fax)

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