When Less (Potential Demand) is More (Revenue): Asymmetric Bidding Capacities in Divisible Good Auctions
46 Pages Posted: 26 Apr 2005
Date Written: May 10, 2005
We show that asymmetry in bidders' capacity constraints plays an important role in inhibiting collusion and promoting competitive outcomes in multi-unit common value auctions. This effect seems to be related to the increased difficulty of coordination when there are fundamental differences between bidders. The discriminatory auction is shown to be more susceptible to collusion than is the uniform-price auction and consequently asymmetry in capacity constraints plays a more important role in the discriminatory auction. These results suggest that the revenue maximizing auction format may depend heavily on a variety of factors specific to particular auction settings.
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