Demand Reduction in Multi-unit Auctions with Varying Numbers of Bidders: Theory and Field Experiments
Recent auction theory and experimental results document strategic demand reduction by bidders uniform-price auctions. The present paper extends this area of research to consider the effects of varying the number of bidders. Our theoretical model predicts that demand reduction should decrease with an increase in the number of bidders. Considerable demand reduction remains even in the asymptotic limit, although truthful bidding yields profits very close to those of equilibrium play. We experimentally confirm several of our predictions by examining bidding behavior of subjects in an actual marketplace, auctioning dozens of sportscards using both uniform-price and Vickrey auction formats.
First version: November 1999
This version: February 2005