On the lowest-winning-bid and the highest-losing-bid auctions
AbstractTheoretical 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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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Mathematical Economics.
Volume (Year): 44 (2008)
Issue (Month): 9-10 (September)
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Web page: http://www.elsevier.com/locate/jmateco
Other versions of this item:
- Claudio Mezzetti & Ilia Tsetlin, 2006. "On the Lowest-Winning-Bid and the Highest-Losing-Bid Auctions," Discussion Papers in Economics 06/16, Department of Economics, University of Leicester.
- Mezzetti, Claudio & Tsetlin, Ilia, 2007. "On the Lowest-Winning-Bid and the Highest-Losing-Bid Auctions," The Warwick Economics Research Paper Series (TWERPS) 832, University of Warwick, Department of Economics.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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