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On the lowest-winning-bid and the highest-losing-bid auctions

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Author Info
Mezzetti, Claudio
Tsetlin, Ilia

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Abstract

Theoretical models of multi-unit, uniform-price auctions assume that the price is given by the highest losing bid. In practice, however, the price is usually given by the lowest winning bid. We derive the equilibrium bidding function of the lowest-winning-bid auction when there are k objects for sale and n bidders with unit demand, and prove that it converges to the bidding function of the highest-losing-bid auction if and only if the number of losers n-k gets large. When the number of losers grows large, the bidding functions converge at a linear rate and the prices in the two auctions converge in probability to the expected value of an object to the marginal winner.

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File URL: http://www.sciencedirect.com/science/article/B6VBY-4RCKKYN-1/1/bcd26f87b512f8940f0a8ef593a4f7e7
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Publisher Info
Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 44 (2008)
Issue (Month): 9-10 (September)
Pages: 1040-1048
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Handle: RePEc:eee:mateco:v:44:y:2008:i:9-10:p:1040-1048

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  1. Mezzetti, Claudio & Pekec, Aleksandar Sasa & Tsetlin, Ilia, 2008. "Sequential vs. single-round uniform-price auctions," Games and Economic Behavior, Elsevier, vol. 62(2), pages 591-609, March. [Downloadable!] (restricted)
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  1. Claudio Mezzetti & Aleksandar Pekec & Ilia Tsetlin, 2005. "Sequential vs. Single-Round Uniform-Price Auctions," Discussion Papers in Economics 05/26, Department of Economics, University of Leicester, revised Apr 2007. [Downloadable!]
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