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Worst-Case Equilibria in First-Price Auctions

Author

Listed:
  • Vitali Gretschko

  • Helene Mass

Abstract

The usual analysis of bidding in first-price auctions assumes that bidders know the distribution of valuations. We analyze first-price auctions in which bidders do not know the precise distribution of their competitors’ valuations, but only the mean of the distribution. We propose a novel equilibrium solution concept based on worst-case reasoning. We find an essentially unique and efficient worst-case equilibrium of the first-price auction, which has appealing properties from both the bidders’ and the seller’s point of view.

Suggested Citation

  • Vitali Gretschko & Helene Mass, 2023. "Worst-Case Equilibria in First-Price Auctions," CRC TR 224 Discussion Paper Series crctr224_2023_434, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2023_434
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp434
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    Cited by:

    1. is not listed on IDEAS
    2. Joseph Feffer, 2024. "Scoring Auctions with Coarse Beliefs," Papers 2410.06150, arXiv.org.

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    Keywords

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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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