Discussion paper

DP3774 On Second Price Auctions and Imperfect Competition

Consider two sellers each of whom has one unit of an indivisible good and two buyers each of whom is interested in buying one unit. The sellers simultaneously set reserve prices and use second price auctions as rationing device. An equilibrium in pure strategies where each sellers has a regular customer is characterized. The result is applied in order to demonstrate that not allowing sellers to use second price auctions may enhance total surplus.


Schmitz, P (2003), ‘DP3774 On Second Price Auctions and Imperfect Competition‘, CEPR Discussion Paper No. 3774. CEPR Press, Paris & London. https://cepr.org/publications/dp3774