Pro–Competitive Rationing in Multi–Unit Auctions

In multi-unit auctions, it is necessary to specify rationing rules to break ties between multiple marginal bids. The standard approach is to ration marginal bids proportionally. This article shows how bidding can be made more competitive – and the auctioneer can increase his surplus – if the rationing rule instead gives increasing priority to bidders with a small volume of marginal bids at clearing prices closer to the reservation price. As compared to standard rationing, such a rule can, in beneficial circumstances, have almost the same effect on the competitiveness of bids as a doubling of the number of bidders.