On the Lowest-Winning-Bid and the Highest-Losing-Bid Auctions
AbstractTheoretical 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 with unit demand, 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 832.
Length: 19 pages
Date of creation: 2007
Date of revision:
Auctions; Lowest-Winning Bid; Highest-Losing Bid; k-th Price Auction; (k+1)-st; Price Auction;
Other versions of this item:
- Mezzetti, Claudio & Tsetlin, Ilia, 2008. "On the lowest-winning-bid and the highest-losing-bid auctions," Journal of Mathematical Economics, Elsevier, vol. 44(9-10), pages 1040-1048, September.
- Claudio Mezzetti & Ilia Tsetlin, 2006. "On the Lowest-Winning-Bid and the Highest-Losing-Bid Auctions," Discussion Papers in Economics 06/16, Department of Economics, University of Leicester.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul Milgrom & Robert J. Weber, 1981.
"A Theory of Auctions and Competitive Bidding,"
447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Ilan Kremer, 2002. "Information Aggregation in Common Value Auctions," Econometrica, Econometric Society, vol. 70(4), pages 1675-1682, July.
- Wolfgang Pesendorfer & Jeroen M. Swinkels, 1996.
"Efficiency and Information Aggregation in Auctions,"
1168, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Jeroen M. Swinkels & Wolfgang Pesendorfer, 2000. "Efficiency and Information Aggregation in Auctions," American Economic Review, American Economic Association, vol. 90(3), pages 499-525, June.
- Milgrom, Paul R, 1981. "Rational Expectations, Information Acquisition, and Competitive Bidding," Econometrica, Econometric Society, vol. 49(4), pages 921-43, June.
- Bikhchandani, Sushil & Riley, John G., 1991. "Equilibria in open common value auctions," Journal of Economic Theory, Elsevier, vol. 53(1), pages 101-130, February.
- McAdams, David, 2007. "Uniqueness in symmetric first-price auctions with affiliation," Journal of Economic Theory, Elsevier, vol. 136(1), pages 144-166, September.
- Hong, Han & Paarsch, Harry J. & Xu, Pai, 2010.
"On the Asymptotic Distribution of the Transaction Price in a Clock Model of a Multi-Unit, Oral, Ascending-Price Auction within the Common-Value Paradigm,"
CEI Working Paper Series
2010-8, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
- Han Hong & Harry J. Paarsch & Pai Xu, 2010. "On the Asymptotic Distribution of the Transaction Price in a Clock Model of a Multi-Unit, Oral, Ascending-Price Auction within the Common-Value Paradigm," Carlo Alberto Notebooks 186, Collegio Carlo Alberto.
- 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.
- 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.
- Claudio Mezzetti & Aleksandar Pekec & Ilia Tsetlin, 2004. "Sequential vs. Single-Round Uniform-Price Auctions," Working Papers 2004.147, Fondazione Eni Enrico Mattei.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Helen Neal).
If references are entirely missing, you can add them using this form.