First-Price Auctions when the Ranking of Valuations
We consider an augmented version of the symmetric private value auction model with independent types. The augmentation, intended to illustrate reality, concerns information bidders have about their opponents. To the standard assumption that every bidder knows his type and the distribution of types is common knowledge we add the assumption that the ranking of bidders' valuations is common knowledge. This set-up induces a particular asymmetric auction model that raises serious technical difficulties. We prove existence and uniqueness of equilibrium in pure strategies in the two bidder case. We also show that the model generally has no analytic solution. If the distribution of valuations is uniform, both bidders bid pointwise more aggressively relative to the standard symmetric case. However, this property does not apply to all distributions of valuations. Finally, we also provide a numerical solution of equilibrium bid functions for the uniform distribution case.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Milgrom, Paul R & Weber, Robert J, 1982.
"A Theory of Auctions and Competitive Bidding,"
Econometric Society, vol. 50(5), pages 1089-1122, September.
- Wolfstetter, Elmar, 1996.
" Auctions: An Introduction,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 10(4), pages 367-420, December.
- McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
- Maskin, Eric & Riley, John, 2000. "Equilibrium in Sealed High Bid Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 439-54, July.
- Milgrom, Paul, 1989. "Auctions and Bidding: A Primer," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 3-22, Summer.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpmi:9701004. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.