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Reputation in multi-unit ascending auction with common values

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  • Kwiek, Maksymilian

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.

Suggested Citation

  • Kwiek, Maksymilian, 2013. "Reputation in multi-unit ascending auction with common values," Economics Letters, Elsevier, vol. 118(1), pages 216-218.
  • Handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:216-218
    DOI: 10.1016/j.econlet.2012.10.007
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    References listed on IDEAS

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    1. Dilip Abreu & Faruk Gul, 2000. "Bargaining and Reputation," Econometrica, Econometric Society, vol. 68(1), pages 85-118, January.
    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. Paul Milgrom, 2000. "Putting Auction Theory to Work: The Simultaneous Ascending Auction," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 245-272, April.
    4. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
    5. 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.
    6. Frank Riedel & Elmar Wolfstetter, 2006. "Immediate demand reduction in simultaneous ascending-bid auctions: a uniqueness result," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(3), pages 721-726, November.
    7. Maksymilian Kwiek, 2011. "Reputation And Cooperation In The Repeated Secondā€Price Auctions," Journal of the European Economic Association, European Economic Association, vol. 9(5), pages 982-1001, October.
    8. Bikhchandani, Sushil, 1988. "Reputation in repeated second-price auctions," Journal of Economic Theory, Elsevier, vol. 46(1), pages 97-119, October.
    9. Klemperer, Paul, 1998. "Auctions with almost common values: The 'Wallet Game' and its applications," European Economic Review, Elsevier, vol. 42(3-5), pages 757-769, May.
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    More about this item

    Keywords

    Multi-unit auction; Uniform price; Ascending auction; Reputation; Aggressive bidding;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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