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Reputation in multi-unit ascending auction with common values

  • Kwiek, Maksymilian

This paper considers a multi-unit ascending auction with two players and common values. A large set of equilibria in this model is not robust to a small reputational perturbation. In particular, if there is a positive probability that there is a type who always demands many units, regardless of price, then the model has a unique equilibrium payoff profile. If this uncertainty is only on one side, then the player who is known to be normal lowers her demand in order to stop the auction immediately at the reserve price. Hence, her possibly committed opponent buys all the units she demands at the lowest possible price. If the reputation is on both sides, then a War of Attrition emerges. Keywords; multi-unit auction, uniform price, ascending auction, reputation, aggressive bidding

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Paper provided by Economics Division, School of Social Sciences, University of Southampton in its series Discussion Paper Series In Economics And Econometrics with number 1012.

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Date of creation: 01 Jul 2010
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Handle: RePEc:stn:sotoec:1012
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  1. Klemperer, Paul, 1998. "Auctions with almost common values: The 'Wallet Game' and its applications," European Economic Review, Elsevier, vol. 42(3-5), pages 757-769, May.
  2. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
  3. Milgrom, Paul, 1998. "Putting auction theory to work : the simultaneous ascending auction," Policy Research Working Paper Series 1986, The World Bank.
  4. David P. Myatt, 2005. "Instant Exit from the Asymmetric War of Attrition," Economics Series Working Papers 160, University of Oxford, Department of Economics.
  5. Maksymilian Kwiek, 2011. "Reputation And Cooperation In The Repeated Secondā€Price Auctions," Journal of the European Economic Association, European Economic Association, vol. 9(5), pages 982-1001, October.
  6. Bikhchandani, Sushil, 1988. "Reputation in repeated second-price auctions," Journal of Economic Theory, Elsevier, vol. 46(1), pages 97-119, October.
  7. McAdams, David, 2007. "Adjustable supply in uniform price auctions: Non-commitment as a strategic tool," Economics Letters, Elsevier, vol. 95(1), pages 48-53, April.
  8. D. Abreu & F. Gul, 1998. "Bargaining and Reputation," Princeton Economic Theory Papers 00s9, Economics Department, Princeton University.
  9. Frank Riedel & Elmar Wolfstetter, 2006. "Immediate demand reduction in simultaneous ascending-bid auctions: a uniqueness result," Economic Theory, Springer, vol. 29(3), pages 721-726, November.
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