The effects of statistically dependent values on equilibrium strategies of bilateral k-double auctions
This paper describes how introducing statistical dependency among trader values changes the equilibrium bidding strategies in bilateral k-double auctions and uses the special case of affiliation to illustrate the range of equilibrium responses to a change in the value distribution. Consistent with standard intuition, a change from independent to strictly affiliated valuations can result in high-value buyers and low-value sellers bidding closer to their actual values while low-value buyers and high-value sellers distort their bids farther from their true values. However, there also exist equilibria for which either type of trader responds to a change in the distribution of values in the opposite direction. Whether a given trader bids more aggressively or less aggressively can also be non-monotonic with respect to the trader's value.
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Levine's Working Paper Archive
666156000000000329, David K. Levine.
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