Uniform price auction
Encyclopedia
A uniform price auction is a multiunit auction
in which a fixed number of identical units of a commodity are sold for the same price. Each bidder in the auction bids a price and a quantity. The price bid is considered the maximum price they are willing to pay per item, and the quantity is the number of units they wish to purchase at that price. Typically these bids are sealed - not revealed to the other buyers until the auction closes. The auctioneer then serves the highest bidder first, giving them the number of units requested, then the second highest bidder and so forth until the supply of the commodity is exhausted. All bidders then pay a per unit price equal to the lowest winning bid (the lowest bid out of the buyers who actually received one or more units of the commodity) - regardless of their actual bid.
Some variations of this auction have the winners paying the highest losing bid rather than the lowest winning bid.
The uniform-price auction does not result in bidders bidding their true valuations as they do in a second-price auction unless each bidder has demand for only a single unit. Instead, bidders shade their bids for units other than their first because those bids may influence the price the bidder pays. Ultimately, this demand reduction results in an inefficient equilibrium.
One example of this type of auction was the initial public offering
of Google
stock in 2004.
Multiunit auction
A multiunit auction is an auction in which several items are sold. The units can be sold each at the same price or at different prices ....
in which a fixed number of identical units of a commodity are sold for the same price. Each bidder in the auction bids a price and a quantity. The price bid is considered the maximum price they are willing to pay per item, and the quantity is the number of units they wish to purchase at that price. Typically these bids are sealed - not revealed to the other buyers until the auction closes. The auctioneer then serves the highest bidder first, giving them the number of units requested, then the second highest bidder and so forth until the supply of the commodity is exhausted. All bidders then pay a per unit price equal to the lowest winning bid (the lowest bid out of the buyers who actually received one or more units of the commodity) - regardless of their actual bid.
Some variations of this auction have the winners paying the highest losing bid rather than the lowest winning bid.
The uniform-price auction does not result in bidders bidding their true valuations as they do in a second-price auction unless each bidder has demand for only a single unit. Instead, bidders shade their bids for units other than their first because those bids may influence the price the bidder pays. Ultimately, this demand reduction results in an inefficient equilibrium.
One example of this type of auction was the initial public offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
of Google
Google
Google Inc. is an American multinational public corporation invested in Internet search, cloud computing, and advertising technologies. Google hosts and develops a number of Internet-based services and products, and generates profit primarily from advertising through its AdWords program...
stock in 2004.