Why packaging matters: the role of unit design in auctions
Cowie, C. and Daripa, Arup and Kapur, Sandeep (2007) Why packaging matters: the role of unit design in auctions. Working Paper. Birkbeck, University of London.
Abstract
The presence of dominant bidders in auctions – those with relatively higher values for the object being auctioned – discourages participation of weaker bidders. If the auction involves multiple units, capping the number of units any bidder is allowed to win can encourage wider participation and increase the seller’s revenue. This paper focuses on a different aspect of auction design in the presence of a dominant bidder with capped demand. We consider the effect of asymmetry among the multiple units, with some units being more valuable than others. We show that the design faces a trade-off between revenue raising competition on asymmetric infra-marginal units and revenue lowering reduction in entry incentives. The revenue-maximizing design calls for an ordered asymmetry among units. Asymmetric units can enhance revenue even when the total demand equals the number of units offered, a case in which symmetric units generate very little revenue.
Metadata
| Item Type: | Monograph (Working Paper) |
|---|---|
| School: | School of Business, Economics & Informatics > Economics, Mathematics and Statistics |
| Depositing User: | Sarah Hall |
| Date Deposited: | 14 Jul 2020 14:35 |
| Last Modified: | 14 Jul 2020 14:35 |
| URI: | https://eprints.bbk.ac.uk/id/eprint/32560 |
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