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A note on the wallet game with discrete bid levels

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  • Gonçalves, Ricardo
  • Ray, Indrajit

Abstract

It is well-known that in the wallet game with two bidders, bidding twice the (individual) signal is an equilibrium. We prove that this strategy is never an equilibrium in a Japanese–English auction once discrete bid levels are introduced; we also discuss the implications of this result.

Suggested Citation

  • Gonçalves, Ricardo & Ray, Indrajit, 2017. "A note on the wallet game with discrete bid levels," Economics Letters, Elsevier, vol. 159(C), pages 177-179.
    • Handle: RePEc:eee:ecolet:v:159:y:2017:i:c:p:177-179
    DOI: 10.1016/j.econlet.2017.07.032
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    References listed on IDEAS

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    1. Isaac, R. Mark & Salmon, Timothy C. & Zillante, Arthur, 2007. "A theory of jump bidding in ascending auctions," Journal of Economic Behavior & Organization, Elsevier, vol. 62(1), pages 144-164, January.
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    3. Sandro Brusco & Giuseppe Lopomo, 2004. "Collusion via Signalling in Simultaneous Ascending Bid Auctions with Heterogeneous Objects, with and without Complementarities," Levine's Bibliography 122247000000000385, UCLA Department of Economics.
    4. Harrison Cheng, 2004. "Optimal Auction Design with Discrete Bidding," KIER Working Papers 592, Kyoto University, Institute of Economic Research.
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    6. 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.
    7. Rothkopf, Michael H. & Harstad, Ronald M., 1994. "On the role of discrete bid levels in oral auctions," European Journal of Operational Research, Elsevier, vol. 74(3), pages 572-581, May.
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    10. Lawrence M. Ausubel, 2004. "An Efficient Ascending-Bid Auction for Multiple Objects," American Economic Review, American Economic Association, vol. 94(5), pages 1452-1475, December.
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    Cited by:

    1. Itzhak Rasooly & Carlos Gavidia-Calderon, 2020. "The importance of being discrete: on the inaccuracy of continuous approximations in auction theory," Papers 2006.03016, arXiv.org, revised Aug 2022.
    2. Fabio Michelucci, 2022. "Promoting Entry and Efficiency via Reserve Prices," Games, MDPI, vol. 13(4), pages 1-7, June.

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    More about this item

    Keywords

    Japanese–English auctions; Wallet game; Discrete bids;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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