Bidder Behavior in Multiunit Auctions: Evidence from Swedish Treasury Auctions

Abstract

We analyze a unique data set on multi-unit auctions, which contains the actual demand schedules of the bidders as well as the auction awards in over 400 Swedish 'Treasury auctions. First, we document that bidders vary their prices, bid dispersion and the quantity demanded in response to increased uncertainty at the time of bidding. Second, we find that bid shading can be explained by a winner's curse driven model where each bidder submits only one bid, despite the fact that the bidders in our data set use much richer bidding strategies. Third, we explore the extent to which the received theories of multi-unit auctions are able to offer insights into the bidder behaviour we observe. Our empirical evidence is consistent with some of the predictions of the models of auctions which emphasize private information, the winner's curse and the champion's plague. While the models of multi-unit auctions serve as useful guideposts, our empirical findings also point to several new areas of research in multi-unit auctions that are of policy and theoretical interest.

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