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On the Lowest-Winning-Bid and the Highest-Losing-Bid Auctions

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Author Info
Claudio Mezzetti ()
Ilia Tsetlin

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Abstract

Theoretical models of multi-unit, uniform-price auctions assume that the price is given by the highest losing bid. In practice, however, the price is usually given by the lowest winning bid. We derive the equilibrium bidding function of the lowest-winning-bid auction when there are k objects for sale and n bidders, and prove that it converges to the bidding function of the highest-losing-bid auction if and only if the number of losers n - k gets large. When the number of losers grows large, the bidding functions converge at a linear rate and the prices in the two auctions converge in probability to the expected value of an object to the marginal winner.

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File URL: http://www.le.ac.uk/economics/research/RePEc/lec/leecon/dp06-16.pdf
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Publisher Info
Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 06/16.

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Date of creation: Dec 2006
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Handle: RePEc:lec:leecon:06/16

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Related research
Keywords: Auctions; Lowest-Winning Bid; Highest-Losing Bid; k-th Price Auction; (k+1)-st Price Auction;

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Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

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References listed on IDEAS
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  1. Mezzetti, Claudio & Pekec, Aleksandar Sasa & Tsetlin, Ilia, 2008. "Sequential vs. single-round uniform-price auctions," Games and Economic Behavior, Elsevier, vol. 62(2), pages 591-609, March. [Downloadable!] (restricted)
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  1. Claudio Mezzetti & Aleksandar Pekec & Ilia Tsetlin, 2005. "Sequential vs. Single-Round Uniform-Price Auctions," Discussion Papers in Economics 05/26, Department of Economics, University of Leicester, revised Apr 2007. [Downloadable!]
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