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Costly Signalling in Auctions -super-1

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  • Johannes Hörner
  • Nicolas Sahuguet

Abstract

This paper analyses a dynamic auction in which a fraction of each bid is sunk. Jump bidding is used by bidders to signal their private information. Bluffing (respectively sandbagging) occurs when a weak (respectively strong) player seeks to deceive his opponent into thinking that he is strong (respectively weak). A player with a moderate valuation bluffs by making a high bid and drops out if his bluff is called. A player with a high valuation should vary his bids and should sometimes sandbag by bidding low, to induce lower bids by his rival. Copyright 2007, Wiley-Blackwell.

Suggested Citation

  • Johannes Hörner & Nicolas Sahuguet, 2007. "Costly Signalling in Auctions -super-1," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(1), pages 173-206.
    • Handle: RePEc:oup:restud:v:74:y:2007:i:1:p:173-206
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    File URL: http://hdl.handle.net/10.1111/j.1467-937X.2007.00418.x
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