Abstract
This chapter examines how the different pricing rules affect bidding behavior by considering the different auctions in a model where bidders' values are private and independently distributed in the case of a single object. It is assumed that bidders are “ex ante” symmetric. If bidders value more than one unit with positive probability, then one refers to that as the case of “multiunit demand.” The single-unit demand model is of interest because equilibrium behavior there is analogous to equilibrium behavior in auctions where only a single object is sold and demanded. An immediate consequence of the dominant strategy nature of the Vickrey auction is that the identical objects are awarded in an efficient manner. The Vickrey auction inherits the dominant strategy property from the second-price auction and delivers efficient allocations. A bidder's own bids influence the price he pays. By contrast, in a Vickrey auction, a bidder's own bids determine how many units he wins but have no influence on the prices paid—each unit is purchased at a competing bid.
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