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Bidding in a possibly common-value auction

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  • Fong, Yuk-fai
  • Garrett, Daniel F.

Abstract

We analyze a second-price auction with two bidders in which only one of the bidders is informed as to whether the object is valued commonly. We show that any equilibrium strategy of the bidder who is uninformed must be part of an equilibrium when both bidders instead know that the auction is not common value, regardless of the way in which the values are different. We derive sufficient conditions for equilibrium existence.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 70 (2010)
Issue (Month): 2 (November)
Pages: 494-501

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Handle: RePEc:eee:gamebe:v:70:y:2010:i:2:p:494-501

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Web page: http://www.elsevier.com/locate/inca/622836

Related research

Keywords: Second-price auction Common value Model uncertainty;

References

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  1. Larson, Nathan, 2009. "Private value perturbations and informational advantage in common value auctions," Games and Economic Behavior, Elsevier, vol. 65(2), pages 430-460, March.
  2. de Frutos, Maria-Angeles & Pechlivanos, Lambros, 2006. "Second-price common-value auctions under multidimensional uncertainty," Games and Economic Behavior, Elsevier, vol. 55(1), pages 43-71, April.
  3. Krishna, Vijay, 2003. "Asymmetric English auctions," Journal of Economic Theory, Elsevier, vol. 112(2), pages 261-288, October.
  4. Jeremy Bulow & Ming Huang & Paul Klemperer, 1996. "Toeholds and Takeovers," Finance 9608001, EconWPA.
  5. George Deltas & Richard Engelbrecht-Wiggans, 2005. "Naive Bidding," Management Science, INFORMS, vol. 51(3), pages 328-338, March.
  6. Milgrom, Paul R, 1981. "Rational Expectations, Information Acquisition, and Competitive Bidding," Econometrica, Econometric Society, vol. 49(4), pages 921-43, June.
  7. Bikhchandani, Sushil, 1988. "Reputation in repeated second-price auctions," Journal of Economic Theory, Elsevier, vol. 46(1), pages 97-119, October.
  8. Parreiras Sergio O., 2006. "Affiliated Common Value Auctions with Differential Information: The Two Bidder Case," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 6(1), pages 1-19, December.
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