Discussion paper
DP15656 A Case for Pay-as-Bid Auctions
Pay-as-bid (or discriminatory) auctions are frequently used to sell homogenous goods such as treasury securities and commodities. We prove the uniqueness of their pure-strategy Bayesian Nash equilibrium and establish a tractable representation of equilibrium bids. Building on these results we analyze the optimal design of pay-as- bid auctions, as well as uniform-price auctions (the main alternative auction format). We show that supply transparency and full disclosure are optimal in pay-as-bid, though not necessarily in uniform-price; pay-as-bid is revenue dominant and might be welfare dominant; and we provide an explanation for the revenue equivalence observed in empirical work.
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