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Reputation in multi-unit ascending auction with common values

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  • Kwiek, Maksymilian
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    Abstract

    This paper considers a multi-unit ascending auction with two players and common values. A large set of equilibria in this model is not robust to a small reputational perturbation. In particular, if there is a positive probability that there is a type who always demands many units, regardless of price, then the model has a unique equilibrium payoff profile. If this uncertainty is only on one side, then the player who is known to be normal lowers her demand in order to stop the auction immediately at the reserve price. Hence, her possibly committed opponent buys all the units she demands at the lowest possible price. If the reputation is on both sides, then a War of Attrition emerges. Keywords; multi-unit auction, uniform price, ascending auction, reputation, aggressive bidding

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    File URL: http://eprints.soton.ac.uk/161635/1/1012_with_cover.pdf
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    Bibliographic Info

    Paper provided by Economics Division, School of Social Sciences, University of Southampton in its series Discussion Paper Series In Economics And Econometrics with number 1012.

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    Date of creation: 01 Jul 2010
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    Handle: RePEc:stn:sotoec:1012

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    1. Paul Milgrom, . "Putting Auction Theory to Work: The Simultaneous Ascending Auction," Working Papers, Stanford University, Department of Economics 98002, Stanford University, Department of Economics.
    2. David P. Myatt, 2005. "Instant Exit from the Asymmetric War of Attrition," Economics Series Working Papers 160, University of Oxford, Department of Economics.
    3. McAdams, David, 2007. "Adjustable supply in uniform price auctions: Non-commitment as a strategic tool," Economics Letters, Elsevier, vol. 95(1), pages 48-53, April.
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