Numerical Computation of Equilibrium Bid Functions in a First-Price Auction with Heterogeneous Risk Attitudes
AbstractWe use numerical methods to compute Nash equilibrium (NE) bid functions for four agents bidding in a first-price auction. Each bidder i is randomly assigned: ri É› [0, rmax], where 1 âˆ’ ri is the Arrow-Pratt measure of constant relative risk aversion. Each ri is independently drawn from the cumulative distribution function Î¦(Ä‹), a beta distribution on [0, rmax]. For various values of the maximum propensity to seek risk, rmax, the expected value of any bidder's risk characteristic, E(ri), and the probability that any bidder is risk seeking, P(ri > 1), we determine the nonlinear characteristics of the (NE) bid functions. Copyright Kluwer Academic Publishers 1998
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Bibliographic InfoArticle provided by Springer in its journal Experimental Economics.
Volume (Year): 1 (1998)
Issue (Month): 2 (September)
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Web page: http://www.springerlink.com/link.asp?id=102888
auctions; equilibrium bidding; numerical analysis;
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