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Auctions with asymmetric common-values: The first-price format

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  • Mª Angeles De Frutos
  • Xavier Jarque

Abstract

We study the performance of the first-price format in auctions with asymmetric common-values. We show that, contrary to the result for second price auctions, a small advantage for one player translates only to small changes in bidders' strategies, and the equilibrium remains close to the first-price equilibrium of the original game. We characterize the equilibrium bidding strategies and their behavior as the degree of asymmetry increases. Finally, we compare the revenues at the optimal auction, the first price auction and the second price auction.

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 146.

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Date of creation: Oct 2004
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Handle: RePEc:bge:wpaper:146

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Keywords: Common-value auctions; asymmetric bidders; spectrum auctions;

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  1. Klemperer, Paul, 1998. "Auctions with almost common values: The 'Wallet Game' and its applications," European Economic Review, Elsevier, vol. 42(3-5), pages 757-769, May.
  2. Klemperer, Paul, 2002. "How (not) to run auctions: The European 3G telecom auctions," European Economic Review, Elsevier, vol. 46(4-5), pages 829-845, May.
  3. Jacob K. Goeree & Theo Offerman, 2000. "Competitive Bidding in Auctions with Private and Common Values," Tinbergen Institute Discussion Papers 00-044/1, Tinbergen Institute.
  4. Bikhchandani, Sushil, 1988. "Reputation in repeated second-price auctions," Journal of Economic Theory, Elsevier, vol. 46(1), pages 97-119, October.
  5. Peter Cramton, 1997. "The FCC Spectrum Auctions: An Early Assessment," Papers of Peter Cramton 97jemsfcc, University of Maryland, Department of Economics - Peter Cramton, revised 12 Jul 1998.
  6. Levin, Dan & Kagel, John H., 2005. "Almost common values auctions revisited," European Economic Review, Elsevier, vol. 49(5), pages 1125-1136, July.
  7. McAfee, R. Preston & McMillan, John, 1989. "Government procurement and international trade," Journal of International Economics, Elsevier, vol. 26(3-4), pages 291-308, May.
  8. Jeremy Bulow & Ming Huang & Paul Klemperer, 1999. "Toeholds and Takeovers," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 427-454, June.
  9. Che, Yeon-Koo & Gale, Ian, 1998. "Standard Auctions with Financially Constrained Bidders," Review of Economic Studies, Wiley Blackwell, vol. 65(1), pages 1-21, January.
  10. repec:wop:humbsf:2000-72 is not listed on IDEAS
  11. Maskin, Eric & Riley, John, 2000. "Asymmetric Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 413-38, July.
  12. de Frutos, Maria-Angeles & Pechlivanos, Lambros, 2006. "Second-price common-value auctions under multidimensional uncertainty," Games and Economic Behavior, Elsevier, vol. 55(1), pages 43-71, April.
  13. Christopher Avery & John H. Kagel, 1997. "Second-Price Auctions with Asymmetric Payoffs: An Experimental Investigation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(3), pages 573-603, 09.
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