On The Complete Information First-Price Auction And Its Intuitive Solution
AbstractDespite the popularity of auction theoretical thinking, it appears that no one has presented an elementary equilibrium analysis of the complete information first-price sealed-bid auction mechanism when the bidding space has a finite grid. This paper aims to remedy that omission. We show that there always exists a "high price equilibrium" which can be considered "the intuitive solution" (an agent with the highest valuation wins the auction bidding at the second highest valuation). Although there might be other "low price equilibria," we also show that when there are two bidders "the intuitive solution" is the unique limiting equilibrium when the grid size goes to zero and ties are randomly broken.
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Bibliographic InfoArticle provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Game Theory Review.
Volume (Year): 13 (2011)
Issue (Month): 03 ()
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Other versions of this item:
- Alcalde, Jose & Dahm, Matthias, 2010. "On the Complete Information First--Price Auction and its Intuitive Solution," MPRA Paper 22306, University Library of Munich, Germany.
- B4 - Schools of Economic Thought and Methodology - - Economic Methodology
- C0 - Mathematical and Quantitative Methods - - General
- C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- D5 - Microeconomics - - General Equilibrium and Disequilibrium
- D7 - Microeconomics - - Analysis of Collective Decision-Making
- M2 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics
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