Pure strategy equilibria of single and double auctions with interdependent values
AbstractWe prove the existence of monotonic pure strategy equilibrium for many kinds of asymmetric auctions with n bidders and unitary demands, interdependent values and independent types. The assumptions require monotonicity only in the own bidder's type. The payments can be a function of all bids. Thus, we provide a new equilibrium existence result for asymmetrical double auctions and a small number of bidders. The generality of our setting requires the use of special tie-breaking rules. We present an example of a double auction with interdependent values where all equilibria are trivial, that is, they have zero probability of trade. This is related to Akerlof's "market for lemmons" example and to the "winner's curse," establishing a connection between them. However, we are able to provide sufficient conditions for non-trivial equilibrium existence.
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Bibliographic InfoArticle provided by Elsevier in its journal Games and Economic Behavior.
Volume (Year): 65 (2009)
Issue (Month): 1 (January)
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Web page: http://www.elsevier.com/locate/inca/622836
Equilibrium existence in auctions Pure strategy Nash equilibrium Monotonic equilibrium Tie-breaking rule Positive probability of trade Market for lemmons Winners' curse;
Other versions of this item:
- Aloisio Araujo & Luciano I. de Castro, 2006. "Pure Strategy Equilibria Of Single And Double Auctions With Interdependent Values," Economics Working Papers we065320, Universidad Carlos III, Departamento de Economía.
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