Design of Divisible Good Markets

Uniform price and discriminatory price auctions are the two most common formats for selling divisible goods. This paper establishes the revenue rankings for these formats and the Vickrey auction in markets with strategic buyers. Our analysis underscores the key role that bidder market power plays in design. We further rank the formats in terms of the criteria employed in the practical design of markets for divisible goods, such as encouraging bidder participation, fostering more aggressive bidding, and stabilizing prices. Our model accommodates small and large markets, as well as di¤erent risk preferences of the buyers and the seller