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A communication equilibrium in English auctions with discrete bidding

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  • Ricardo Gonçalves

    ()
    (Faculdade de Economia e Gestão - Universidade Católica Portuguesa - Porto)

Abstract

This paper analyses a model of a common value English auction with discrete bidding. In this model, we show that there exists a communication equilibrium in which the high signal bidder strategically chooses his first bid so as to maximise his expected utility. Straightforward bidding, or increasing the bid by the minimum amount possible, is the equilibrium strategy for both bidders in all other auction rounds. We relate this result to recent research on English auctions with discrete bidding and auctions where bidders may have noisy information about their opponent's signals.

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Bibliographic Info

Paper provided by Faculdade de Economia e Gestão, Universidade Católica Portuguesa (Porto) in its series Working Papers de Economia (Economics Working Papers) with number 042008.

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Length: 17 pages
Date of creation: Jun 2008
Date of revision:
Handle: RePEc:cap:wpaper:042008

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Keywords: English Auctions; discrete bidding; communication equilibrium;

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References

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  1. Tilman Börgers & Christian Dustmann, 2005. "Strange Bids: Bidding Behaviour in the United Kingdom's Third Generation Spectrum Auction," Economic Journal, Royal Economic Society, vol. 115(505), pages 551-578, 07.
  2. Steven A. Matthews, 1995. "A Technical Primer on Auction Theory I: Independent Private Values," Discussion Papers 1096, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. R. Aumann, 2010. "Subjectivity and Correlation in Randomized Strategies," Levine's Working Paper Archive 389, David K. Levine.
  4. 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.
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  6. Harstad, Ronald M., 1991. "Asymmetric bidding in second-price, common-value auctions," Economics Letters, Elsevier, vol. 35(3), pages 249-252, March.
  7. Plott, Charles R. & Salmon, Timothy, 2002. "The Simultaneous, Ascending Auction: Dynamics of Price Adjustment in Experiments and in the U.K. 3G Spectrum Auction," Working Papers 1155, California Institute of Technology, Division of the Humanities and Social Sciences.
  8. Ulrich Kamecke, 1993. "Dominance or Maximin: How to Solve an English Auction," Discussion Paper Serie A 418, University of Bonn, Germany.
  9. FORGES, Françoise, . "An approach to communication equilibria," CORE Discussion Papers RP -721, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Mireia Jofre-Bonet & Martin Pesendorfer, 2001. "Estimation of a Dynamic Auction Game," NBER Working Papers 8626, National Bureau of Economic Research, Inc.
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  13. R. Aumann, 2010. "Correlated Equilibrium as an expression of Bayesian Rationality," Levine's Bibliography 513, UCLA Department of Economics.
  14. Lucking-Reiley, David, 2000. "Auctions on the Internet: What's Being Auctioned, and How?," Journal of Industrial Economics, Wiley Blackwell, vol. 48(3), pages 227-52, September.
  15. R. Isaac & Timothy Salmon & Arthur Zillante, 2005. "An experimental test of alternative models of bidding in ascending auctions," International Journal of Game Theory, Springer, vol. 33(2), pages 287-313, 06.
  16. Patrick Bajari & Ali Horta�su, 2004. "Economic Insights from Internet Auctions," Journal of Economic Literature, American Economic Association, vol. 42(2), pages 457-486, June.
  17. Kim, Jinwoo & Che, Yeon-Koo, 2004. "Asymmetric information about rivals' types in standard auctions," Games and Economic Behavior, Elsevier, vol. 46(2), pages 383-397, February.
  18. Bikhchandani, Sushil & Riley, John G., 1991. "Equilibria in open common value auctions," Journal of Economic Theory, Elsevier, vol. 53(1), pages 101-130, February.
  19. Myerson, Roger B, 1986. "Multistage Games with Communication," Econometrica, Econometric Society, vol. 54(2), pages 323-58, March.
  20. Axel Ockenfels & David Reiley & Abdolkarim Sadrieh, 2006. "Online Auctions," NBER Working Papers 12785, National Bureau of Economic Research, Inc.
  21. Atanu R. Sinha & Eric A. Greenleaf, 2000. "The Impact of Discrete Bidding and Bidder Aggressiveness on Sellers' Strategies in Open English Auctions: Reserves and Covert Shilling," Marketing Science, INFORMS, vol. 19(3), pages 244-265, May.
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  24. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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Cited by:
  1. Lucie Ménager, 2013. "Communication in procurement: silence is not golden," Working Papers hal-00856078, HAL.

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