Revenue Equivalence and Bidding Behavior in a Multi-Unit Auction Market: An Empirical Analysis

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Abstract
Revenue-equivalence of competitive and discriminatory formats is a major result for private-value multi-unit auctions with risk-neutral bidders. Among the factors that may cause this result to break down, the most notorious ones are risk-aversion, value-affiliation, and endogenous bidder participation. Using data from competitive and discriminatory auctions undertaken in the Zambian foreign exchange market, I analyze revenue-equivalence and other bidding phenomena. The results indicate that (i) competitive auctions were revenue-superior due to higher participation; (ii) high bidders adjusted with delay to an auction format change; and (iii) a reservation bid was used as a policy instrument.

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