Revenue and efficiency in multi-unit uniform-price auctions

•I model the uniform-price auction of several identical units with a reservation price.•Bidders are symmetric and each bidder submits two different bids.•I examine the effect of changes in the sellerʼs reservation price on revenue and efficiency.•Increasing the reservation price will increase both the sellerʼs revenue and efficiency.•The reservation price effect on efficiency is in contrast to other auction formats.

This paper analyzes efficiency in a uniform-price multi-unit auction with a positive reservation price. I demonstrate that the reservation price is an important policy tool that may increase efficiency (or welfare) in multi-unit uniform-price auctions. I show that the higher the reservation price is, the higher is the sellerʼs revenue and the higher is the efficiency of a final allocation of units that could be attained in a multi-unit uniform-price auction. The reservation price increases the bidderʼs equilibrium strategy in a specific way that is inherent to the uniform-price auction. Thus the reservation price effect on efficiency is in contrast to other auction formats; e.g., the reservation price decreases efficiency in the Vickrey auction and single-unit auctions with symmetric bidders. Therefore the main result can be added to the list of results from mechanism design and auction theory that fail to extend the single-unit/single-dimensional context to the multi-unit/multi-dimensional one.