Review of Finance Vol. 10 No. 3 2006

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

Orly Sade¹; Charles Schnitzlein²; Jaime F. Zender³

¹ Jerusalem School of Business, Hebrew University of Jerusalem · ² College of Business Administration, University of Central Florida · ³ Leeds School of Business, University of Colorado Boulder

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.

DOI

10.1007/s10679-006-9003-x

Volume

10

Issue

3

Pages

389-416

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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