When less (potential demand) is more (revenue): Asymmetric bidding capacities in divisible good auctions

Orly Sade*, Charles Schnitzlein, Jaime F. Zender

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

12 Scopus citations

Abstract

We show that asymmetry in bidders' capacity constraints plays an important role in inhibiting collusion and promoting competitive outcomes in multi-unit auctions in which the final value of the good is common knowledge. This effect appears to be related to the increased difficulty of coordination when there are significant differences between bidders. Due to its impact on collusive outcomes, asymmetry in bidding capacities has a more powerful impact on the seller's revenue than does the auction type. Consistent with the finding in Sade et al. (2006) that the discriminatory auction is more susceptible to collusion than the uniform-price auction, asymmetry in capacity constraints has a greater impact in discriminatory auctions.

Original languageAmerican English
Pages (from-to)389-416
Number of pages28
JournalReview of Finance
Volume10
Issue number3
DOIs
StatePublished - Sep 2006

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