Revenue Generating Properties of Sealed-Bid Auctions: An Experimental Analysis of One-Price and Discriminative Processes

Abstract

The two most prominent forms of sealed-bid auctions are the discriminative pricing rule and the one-price (or "competitive") rule. With the discriminative rule such as that used by the U.S. Treasury for the sale of revenue bonds, each buyer pays a price equal to his/her accepted bid. That is, when a quantity Q is offered for sale, the Q highest bids are accepted and the successful buyer pays a price equal to his/her bid. With the one-price mechanism such as that used in French auctions of new stock issues, the successful buyer pays a price equal to the lowest accepted bid. That is, when a given quantity, Q, is offered for sale, the highest Q bids are accepted and each successful buyer pays a price equal to the lowest accepted bid.

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