Separating Equilibria in Public Auctions
We consider two private-value auctions where the prize in one is higher than the prize in the other. We show that a separating equilibrium exists in which bidders with a high valuation attend the auction with the higher prize while bidders with a low valuation attend the auction with the lower prize. In addition, we prove that a weak separating equilibrium exists where the strong bidders attend the high prize auction while the weak bidders randomize and may attend either auction, although with a higher probability of attending the low prize auction. In the set of auctions with separating equilibrium, we find the optimal minimum bids that maximize a seller's expected revenue.
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Volume (Year): 9 (2009)
Issue (Month): 1 (September)
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References listed on IDEAS
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- Krishna, Vijay, 2002. "Auction Theory," Elsevier Monographs, Elsevier, edition 1, number 9780124262973.
- Michael Peters, 1997. "A Competitive Distribution of Auctions," Review of Economic Studies, Oxford University Press, vol. 64(1), pages 97-123.
- Burguet, Roberto & Sakovics, Jozsef, 1999. "Imperfect Competition in Auction Designs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(1), pages 231-247, February.
- Hernando-Veciana, Angel, 2005. "Competition among auctioneers in large markets," Journal of Economic Theory, Elsevier, vol. 121(1), pages 107-127, March.
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