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Does the competition structure impact the performance of multi-unit auctions? An experimental investigation*

Published online by Cambridge University Press:  17 August 2016

Raphaële Préget  and
Sophie Thoyer
Raphaële Préget
Affiliation:
INRA, UMR 1135 LAMETA, F-34000 Montpellier, France; preget@supagro.inra.fr
Sophie Thoyer
Affiliation:
Montpellier SupAgro, UMR 1135 LAMETA, F-34000 Montpellier, France; thoyer@supagro.inra.fr
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Summary

Competition in a multi-unit auction is measured both by the number of bidders and by the relative size of their demands, compared to the number of units on sale. For the same degree of competition (identical aggregate demand and supply), we can observe different demand structures. Do they have an impact on the auction efficiency and revenue-raising properties? It is essential to understand better the impact of competition structure on performance in order to draw recommendations for the design of multi-unit auctions. Theoretical results demonstrate on a simple case contrasting a uniform-price auction of two bidders with a demand of 6 units each, and an auction of 6 bidders with a demand of two units each, that there are multiple equilibria leading to different performance outcome. Experiments are conducted to compare the performance of these two auctions. Results support that with a constant competition degree, the seller gets higher expected revenue with a lower variance when he faces a large number of bidders with small individual demands. We show that this result is attained with no significant effect on allocative efficiency.

La concurrence dans une enchère multi-unitaire est mesurée à la fois par le nombre d'enchérisseurs et par la quantité demandée par chacun, rapportée au nombre d'unités en vente. Pour le même degré de concurrence (demande agrégée et offre identiques), nous pouvons observer différentes structures de demande. Celles-ci ont-elles un impact sur l'efficience de l'enchère et le revenu du vendeur? Il est essentiel de mieux comprendre l'impact de la structure de la concurrence sur la performance des enchères multi-unitaires pour pouvoir faire des recommandations sur leur design. Des résultats théoriques montrent sur un cas simple, comparant une enchère à prix uniforme avec 2 enchérisseurs ayant chacun une demande de 6 unités et une enchère avec 6 enchérisseurs ayant chacun une demande de 2 unités, qu'il existe une multiplicité d'équilibres conduisant à des performances différentes. Des expériences en laboratoire sont conduites pour comparer la performance de ces deux enchères. Les résultats indiquent que, pour un même degré de concurrence, le vendeur obtient un revenu espéré supérieur avec une variance plus faible lorsqu'il fait face à un grand nombre d'enchérisseurs demandant peu d'unités chacun. Nous montrons que ce résultat est obtenu sans effet significatif sur l'efficience allocative.

Keywords

ExperimentsMulti-unit auctionCompetition structureC92D4D44Expériencesenchères multi-unitairesstructure de la concurrenceC92D4D44
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 80 , Issue 2 , 2014 , pp. 85 - 109
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 2015 

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Footnotes

*

We are grateful to Maud Evrard and Sandra Said for their precious work in conducting the experiments, to Marc Willinger on early advice on the methodology and to Ron Harstad for helpful discussions and wise comments. We thank participants of the Workshop on Behavioral Game Theory during the 20th Stony Brook Game Theory Festival for their improvement suggestions. We also acknowledge financial support from the ANR project “RISECO”, ANR-08-JCJC-0074-01.

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