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Bilateral k+1-price auctions with asymmetric shares and values

  • Wasser, Cédric

We study a sealed-bid auction between two bidders with asymmetric independent private values. The two bidders own asymmetric shares in a partnership. The higher bidder buys the lower bidderʼs shares at a per-unit price that is a convex combination of the two bids. The weight of the lower bid is denoted by k∈[0,1]. We partially characterize equilibrium strategies and show that they are closely related to equilibrium strategies of two well-studied mechanisms: the double auction between a buyer and a seller and the first-price auction between two buyers (or two sellers). Combining results from those two branches of the literature enables us to prove equilibrium existence. Moreover, we find that there is a continuum of equilibria if k∈(0,1) whereas the equilibrium is unique if k∈{0,1}. Our approach also suggests a procedure for numerical simulations.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 82 (2013)
Issue (Month): C ()
Pages: 350-368

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Handle: RePEc:eee:gamebe:v:82:y:2013:i:c:p:350-368
DOI: 10.1016/j.geb.2013.07.014
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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