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Value Bounds and Best Response Violations in Discriminatory Share Auctions

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  • Häfner, Samuel

    () (University of Basel)

Abstract

This paper analyzes a discriminatory share auction in which bidders submit nonincreasing step functions with a bounded number of steps, the type space consists of private non-increasing marginal valuation functions, and the number of participants is random. I show that the interim utility can be written as a simple functional of the distribution of the allocated quantity. This allows me to derive equilibrium existence and to give a characterization of the equilibrium bid schedules in terms of the individual bidders’ optimality conditions. The characterization facilitates the formulation of bounds on the estimates of marginal valuations between the submitted quantity points and permits a simple estimator of the fraction of best response violations among the submitted bids. Proofs of concept for the bounds and the estimator are given by using a novel data set from meat import quota auctions in Switzerland.

Suggested Citation

  • Häfner, Samuel, 2015. "Value Bounds and Best Response Violations in Discriminatory Share Auctions," Working papers 2015/14, Faculty of Business and Economics - University of Basel.
  • Handle: RePEc:bsl:wpaper:2015/14
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    References listed on IDEAS

    as
    1. Jakub Kastl, 2011. "Discrete Bids and Empirical Inference in Divisible Good Auctions," Review of Economic Studies, Oxford University Press, vol. 78(3), pages 974-1014.
    2. Ali Hortaçsu & Jakub Kastl, 2012. "Valuing Dealers' Informational Advantage: A Study of Canadian Treasury Auctions," Econometrica, Econometric Society, vol. 80(6), pages 2511-2542, November.
    3. Robert Wilson, 1979. "Auctions of Shares," The Quarterly Journal of Economics, Oxford University Press, vol. 93(4), pages 675-689.
    4. Nuno Cassola & Ali Hortaçsu & Jakub Kastl, 2013. "The 2007 Subprime Market Crisis Through the Lens of European Central Bank Auctions for Short‐Term Funds," Econometrica, Econometric Society, vol. 81(4), pages 1309-1345, July.
    5. Philip J. Reny, 1999. "On the Existence of Pure and Mixed Strategy Nash Equilibria in Discontinuous Games," Econometrica, Econometric Society, vol. 67(5), pages 1029-1056, September.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Discriminatory Share Auctions; Random Participation; Estimation;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C57 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Econometrics of Games and Auctions

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