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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. Paul Klemperer, 2001. "How (Not) to Run Auctions: The European 3G Telecom Auctions," Economics Series Working Papers, University of Oxford, Department of Economics 2002-W05, University of Oxford, Department of Economics.
  2. Peter Cramton, 1997. "The FCC Spectrum Auctions: An Early Assessment," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 6(3), pages 431-495, 09.
  3. Levin, Dan & Kagel, John H., 2005. "Almost common values auctions revisited," European Economic Review, Elsevier, Elsevier, vol. 49(5), pages 1125-1136, July.
  4. Jeremy Bulow & Ming Huang & Paul Klemperer, 1996. "Toeholds and Takeovers," Finance, EconWPA 9608001, EconWPA.
  5. McAfee, R. Preston & McMillan, John, 1989. "Government procurement and international trade," Journal of International Economics, Elsevier, Elsevier, vol. 26(3-4), pages 291-308, May.
  6. Che, Yeon-Koo & Gale, Ian, 1998. "Standard Auctions with Financially Constrained Bidders," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 65(1), pages 1-21, January.
  7. Jacob K. Goeree & Theo Offerman, 2000. "Competitive Bidding in Auctions with Private and Common Values," Tinbergen Institute Discussion Papers, Tinbergen Institute 00-044/1, Tinbergen Institute.
  8. Klemperer, Paul, 1998. "Auctions with almost common values: The 'Wallet Game' and its applications," European Economic Review, Elsevier, Elsevier, vol. 42(3-5), pages 757-769, May.
  9. Christopher Avery & John H. Kagel, 1997. "Second-Price Auctions with Asymmetric Payoffs: An Experimental Investigation," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 6(3), pages 573-603, 09.
  10. de Frutos, Maria-Angeles & Pechlivanos, Lambros, 2006. "Second-price common-value auctions under multidimensional uncertainty," Games and Economic Behavior, Elsevier, Elsevier, vol. 55(1), pages 43-71, April.
  11. Maskin, Eric & Riley, John, 2000. "Asymmetric Auctions," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 67(3), pages 413-38, July.
  12. repec:wop:humbsf:2000-72 is not listed on IDEAS
  13. Bikhchandani, Sushil, 1988. "Reputation in repeated second-price auctions," Journal of Economic Theory, Elsevier, Elsevier, vol. 46(1), pages 97-119, October.
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