Professor of Decision Sciences
Discriminatory Pricing; Uniform Pricing; Auctions; Demand Uncertainty; Stochastic Number of Bidders ;
An important managerial question is the choice of the pricing rule. The authors study whether this choice depends on the uncertainty about the number of participating bidders by comparing expected revenues under discriminatory and uniform pricing within an auction model with afﬁliated values, stochastic number of bidders, and linear bidding strategies.The authors show that if uncertainty about the number of bidders is substantial, then the discriminatory pricing generates higher expected revenues than the uniform pricing. In particular, the ﬁrst-price auction might generate higher revenues than the second-price auction. Therefore, uncertainty about the number of bidders is an important factor to consider when choosing the pricing rule.The authors also study whether eliminating this uncertainty, i.e., revealing the number of bidders, is in the seller’s interests, and discuss the existence of an increasing symmetric equilibrium.