Demand Reduction and Inefficiency in Multi-Unit Auctions

  title={Demand Reduction and Inefficiency in Multi-Unit Auctions},
  author={Lawrence M. Ausubel and Peter Cramton and Marek Pycia and Marzena Rostek and Marek Weretka},
  journal={The Review of Economic Studies},
Auctions often involve the sale of many related goods: Treasury, spectrum, and electricity auctions are examples. In multi-unit auctions, bids for marginal units may affect payments for inframarginal units, giving rise to “demand reduction” and furthermore to incentives for shading bids differently across units. We establish that such differential bid shading results generically in ex post inefficient allocations in the uniform-price and pay-as-bid auctions. We also show that, in general, the… 

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