Auctions of Homogeneous Goods: A Case for Pay-as-Bid

The pay-as-bid auction is a prominent format for selling homogenous goods such as treasury securities and commodities. We analyze the optimal design of pay-as-bid auctions allowing for asymmetric information. We show that supply transparency and full disclosure are optimal in pay-as-bid, though not necessarily in uniform-price (the main alternative auction format). Pay-as-bid is revenue dominant and might be welfare dominant. Under assumptions commonly imposed in empirical work, the two formats are revenue and welfare equivalent.