Market Power and Welfare in Asymmetric Divisible Good Auctions

Xavier Vives and Carolina Manzano

No 11731, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We analyze a divisible good uniform-price auction that features two groups, each with a finite number of identical bidders, who compete in demand schedules. In the linear-quadratic-normal framework, this paper presents conditions under which the unique equilibrium in linear demands exists and derives novel comparative statics results that highlight the interaction between payoff and information parameters with asymmetric groups. We find that the strategic complementarity in the slopes of traders' demands is reinforced by inference effects from prices, and display the role of payoff and information asymmetries in explaining deadweight losses. Furthermore, price impact and the deadweight loss need not move together and market integration may reduce welfare. The results are consistent with the available empirical evidence.

Keywords: Demand/supply schedule competition; Private information; Liquidity auctions; Treasury auctions; Electricity auctions; market integration (search for similar items in EconPapers)
JEL-codes: D44 D82 E58 G14 (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-com, nep-mac and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Market power and welfare in asymmetric divisible good auctions (2021)
Working Paper: Market Power and Welfare in Asymmetric Divisible Good Auctions (2017)
Working Paper: Market Power and Welfare in Asymmetric Divisible Good Auctions (2017)
Working Paper: Market Power and Welfare in Asymmetric Divisible Good Auctions (2016)
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