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Demand Reduction and Inefficiency in Multi-Unit Auctions

dc.contributor.authorAusubel, Lawrence M.
dc.contributor.authorCramton, Peter
dc.description.abstractAuctions typically involve the sale of many related goods. Treasury, spectrum and electricity auctions are examples. In auctions where bidders pay the market-clearing price for items won, large bidders have an incentive to reduce demand in order to pay less for their winnings. This incentive creates an inefficiency in multiple-item auctions. Large bidders reduce demand for additional items and so sometimes lose to smaller bidders with lower values. We demonstrate this inefficiency in an auction model which allows interdependent values. We also establish that the ranking of the uniform-price and pay-as-bid auctions is ambiguous in both revenue and efficiency terms. Bidding behavior in spectrum auctions, electricity auctions, and experiments highlights the empirical importance of demand reduction.en
dc.format.extent249856 bytes
dc.subjectmulti-use auctionsen
dc.subjectauction modelsen
dc.titleDemand Reduction and Inefficiency in Multi-Unit Auctionsen
dc.relation.isAvailableAtDigital Repository at the University of Marylanden_us
dc.relation.isAvailableAtEconomics Departmenten_us
dc.relation.isAvailableAtCollege of Behavioral and Social Sciencesen_us
dc.relation.isAvailableAtUniversity of Maryland (College Park, Md.)en_us

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