Tilting the Supply Schedule to Enhance Competition in Uniform-Price Auctions

Abstract

Uniform-price auctions of a divisible good in ÿxed supply admit underpricing equilibria, where bidders submit high inframarginal bids to prevent competition on prices. The seller can obstruct this behavior by tilting her supply schedule and making the amount of divisible good on o er change endogenously with its (uniform) price. Precommitting to an increasing supply curve is a strategic instrument to reward aggressive bidding and enhance expected revenue. A ÿxed supply may not be optimal even when accounting for the cost to the seller of issuing a quantity di erent from her target supply.