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Mixed Strategies in Discriminatory Divisible-good Auctions

  • Anderson, Edward J.

    (Faculty of Economics and Business)

  • Holmberg, Pär

    ()

    (Research Institute of Industrial Economics (IFN))

  • Philpott, Andrew B.

    (Department of Engineering Science)

Author: Edward J. Anderson, Pär Holmberg and Andrew B. Philpott Keywords: Pay-as-bid Auction; Divisible Good Auction; Mixed Strategy Equilibria; Wholesale Electricity Markets Pages: 71 Published: November 24, 2009 JEL-codes: D43; D44; C72 Download Wp814.pdf (756 kB) Abstract Using the concept of market-distribution functions, we derive general optimality conditions for discriminatory divisible-good auctions, which are also applicable to Bertrand games and non-linear pricing. We introduce the concept of offer distribution function to analyze randomized offer curves, and characterize mixed-strategy Nash equilibria for pay-as-bid auctions where demand is uncertain and costs are common knowledge; a setting for which pure-strategy supply function equilibria typically do not exist. We generalize previous results on mixtures over horizontal offers as in Bertrand-Edgeworth games, but more importantly we characterize novel mixtures over partly increasing supply functions.

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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 814.

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Length: 71 pages
Date of creation: 24 Nov 2009
Date of revision:
Publication status: Published as Anderson, Edward J., Pär Holmberg and Andrew B. Philpott, 'Mixed Strategies in Discriminatory Divisible-good Auctions' in Rand Journal of Economics, 2013, pages 1-32.
Handle: RePEc:hhs:iuiwop:0814
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