Adjustable Supply in Uniform Price Auctions: Non-Commitment as a Strategic Tool

In some uniform price auctions, the auctioneer retains flexibility to adjust the total quantity sold after receiving the bids. Would such an auctioneer be better off committing to a fixed quantity and reserve price? Not necessarily. In the simplest possible model, this paper shows that auctioneer expected profit and social welfare are each strictly higher in all equilibria given adjustable supply than in all equilibria given any fixed quantity and reserve price. ∗MIT Sloan School of Management. Email: [email protected]. Post: E52-448, MIT Sloan, 50 Memorial Drive, Cambridge, MA 02142. I thank Susan Athey, Alessandro Pavan, Robert Wilson, participants at FERC, Maryland, Northwestern, and UC Energy Institute seminars, and especially Jeremy Bulow and Paul Milgrom. This research has been supported by the State Farm Companies Foundation and National Science Foundation grant SES-0241468.