When Less (Potential Demand) is More (Revenue): Asymmetric Bidding Capacities in Divisible Good Auctions

46 Pages Posted: 26 Apr 2005

See all articles by Orly Sade

Orly Sade

Hebrew University of Jerusalem - Department of Finance

Charles R. Schnitzlein

School of Business, University of Vermont

Jaime F. Zender

University of Colorado at Boulder - Department of Finance

Date Written: May 10, 2005

Abstract

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.

Suggested Citation

Sade, Orly and Schnitzlein, Charles R. and Zender, Jaime F., When Less (Potential Demand) is More (Revenue): Asymmetric Bidding Capacities in Divisible Good Auctions (May 10, 2005). Available at SSRN: https://ssrn.com/abstract=705901 or http://dx.doi.org/10.2139/ssrn.705901

Orly Sade (Contact Author)

Hebrew University of Jerusalem - Department of Finance ( email )

Mount Scopus
Jerusalem, 91905
Israel
972 2 588 3227 (Phone)

Charles R. Schnitzlein

School of Business, University of Vermont ( email )

Burlington, VT 05405
United States
802-656-9281 (Phone)

Jaime F. Zender

University of Colorado at Boulder - Department of Finance ( email )

Boulder, CO 80309
United States
303-554-1665 (Phone)
303-492-4689 (Fax)

HOME PAGE: http://www-bus.colorado.edu/faculty/Zender/

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