Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/149348 
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper No. 6261
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We analyze a divisible good uniform-price auction that features two groups each with a finite number of identical bidders. Equilibrium is unique, and the relative market power of a group increases with the precision of its private information but declines with its transaction costs. In line with empirical evidence, we find that an increase in transaction costs and/or a decrease in the precision of a bidding group.s information induces a strategic response from the other group, which thereafter attenuates its response to both private information and prices. A “stronger” bidding group -which has more precise private information, faces lower transaction costs, and is more oligopsonistic- has more market power and so will behave competitively only if it receives a higher per capita subsidy rate. When the strong group values the asset no less than the weak group, the expected deadweight loss increases with the quantity auctioned and also with the degree of payoff asymmetries. Market power and the deadweight loss may be negatively associated.
Subjects: 
demand/supply schedule competition
private information
liquidity auctions
treasury auctions
electricity auctions
JEL: 
D44
D82
G14
E58
Document Type: 
Working Paper
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