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Affiliated Common Value Auctions with Differential Information: The Two Bidder Case

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  • Parreiras Sergio O.

    () (University of North Carolina, Chapel Hill)

Abstract

I study affiliated, pure common-value auctions with ex-ante asymmetric buyers. For the two-buyer case I characterize and prove uniqueness of the equilibrium of hybrid auctions where the payment is a weighted average of the highest and second-highest bids. A recursive method to explicitly compute the equilibrium is presented. It is shown that any hybrid auction yields at least as much revenue as the first-price auction. In particular, the equilibrium of the second-price auction, obtained in the limit by letting the weight of the highest bid go to zero, revenue-dominates the first-price auction.

Suggested Citation

  • Parreiras Sergio O., 2006. "Affiliated Common Value Auctions with Differential Information: The Two Bidder Case," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 6(1), pages 1-19, December.
  • Handle: RePEc:bpj:bejtec:v:contributions.6:y:2006:i:1:n:12
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Appelbaum, Elie & Kohli, Ulrich, 1998. "Import-Price Uncertainty, Production Decisions, and Relative Factor Shares," Review of International Economics, Wiley Blackwell, pages 345-360.
    2. repec:eee:gamebe:v:104:y:2017:i:c:p:78-91 is not listed on IDEAS
    3. Fong, Yuk-fai & Garrett, Daniel F., 2010. "Bidding in a possibly common-value auction," Games and Economic Behavior, Elsevier, vol. 70(2), pages 494-501, November.
    4. Harrison Cheng & Guofu Tan, 2010. "Asymmetric common-value auctions with applications to private-value auctions with resale," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), pages 253-290.
    5. Liu, Heng, 2014. "Equilibrium selection in common-value second-price auctions," Games and Economic Behavior, Elsevier, vol. 84(C), pages 1-6.
    6. Lorentziadis, Panos L., 2016. "Optimal bidding in auctions from a game theory perspective," European Journal of Operational Research, Elsevier, vol. 248(2), pages 347-371.

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