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Affiliation, Equilibrium Existence and Revenue Ranking of Auctions

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  • Luciano De Castro
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    Abstract

    Affiliation has been a prominent assumption in the study of economic models with statistical dependence. Despite its large number of applications, especially in auction theory, affiliation has limitations that are important to be aware of. This paper shows that affiliation is a restrictive condition and the intuition usually given for its adoption may be misleading. Also, other usual justifications for affiliation are not compelling. Moreover, some implications of affiliation — namely, equilibrium existence in first-price auctions and the revenue dominance of second-price auctions — do not generalize to other definitions of positive dependence. JEL Classification Numbers: C62, C72, D44, D82.

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    Bibliographic Info

    Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1530.

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    Date of creation: 01 Dec 2010
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    Handle: RePEc:nwu:cmsems:1530

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    Related research

    Keywords: affiliation; positive dependence; statistical dependence of types; conditional independence; de Finetti’s theorem; minimally informative random variable; auctions; pure strategy equilibrium; revenue ranking.;

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    1. Paul Klemperer, 2004. "Introduction to Auctions: Theory and Practice
      [Auctions: Theory and Practice]
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    2. Hubbard, Timothy P. & Li, Tong & Paarsch, Harry J., 2011. "Semiparametric Estimation in Models of First-Price, Sealed-Bid Auctions with Affiliation," CEI Working Paper Series 2010-10, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
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    20. John G. Riley, 1986. "Ex Post Information in Auctions," UCLA Economics Working Papers 367, UCLA Department of Economics.
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    24. Maskin, Eric S & Riley, John G, 1984. "Optimal Auctions with Risk Averse Buyers," Econometrica, Econometric Society, vol. 52(6), pages 1473-1518, November.
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    Cited by:
    1. Li, Fei & Kotowski, Maciej Henryk, 2014. "On the continuous equilibria of affiliated-value, all-pay auctions with private budget constraints," Scholarly Articles 11718166, Harvard Kennedy School of Government.

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