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Prebidding first-price auctions with and without head starts

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  • Minchuk, Yizhaq
  • Sela, Aner

Abstract

We study the effect of prebidding in first-price auctions with a single prize under incomplete information. The values of the n−1 bidders are private information while bidder 1’s value is commonly known. Bidder 1 places his bid before all the n−1 bidders. We show that regardless of his value, bidder 1 always has a positive effect on the expected highest bid. However, bidder 1’s contribution to the expected highest bid is not significant since the prebidding first-price auction with n bidders may be less profitable than the optimal simultaneous first-price auction with only n−1 bidders. On the other hand, by giving the optimal head start to bidder 1, the prebidding first-price auction is always more profitable than the optimal simultaneous first-price auction with n−1 bidders

Suggested Citation

  • Minchuk, Yizhaq & Sela, Aner, 2018. "Prebidding first-price auctions with and without head starts," Mathematical Social Sciences, Elsevier, vol. 91(C), pages 51-55.
    • Handle: RePEc:eee:matsoc:v:91:y:2018:i:c:p:51-55
    DOI: 10.1016/j.mathsocsci.2017.07.001
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    References listed on IDEAS

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    1. Dastidar, Krishnendu Ghosh & Jain, Sonakshi, 2023. "Favouritism and corruption in procurement auctions," Mathematical Social Sciences, Elsevier, vol. 123(C), pages 10-24.

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