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Auctions with Almost Homogeneous Bidders

  • Bernard Lebrun

    ()

    (Department of Economics, York University)

We deviate from the symmetric case of the independent private value model by allowing the bidders’ value distributions, which depend on parameters, to be slightly different. We show that previous results about the equality to the first-order in the parameters between revenues from the second-price auction and other auction mechanisms follow from the joint differentiability of the equilibria with respect to the parameters. We prove this differentiability for the first-price auction and obtain general formulas for the different first-order effects. From our results about the first-price auction, we analytically generate examples with continuous distributions where a stochastic improvement to a bidder’s value distribution reduces his equilibrium payoff. In another application, we show that, starting from competition among cartels of equal sizes, allowing in a small number of members from other cartels can be profitable only if the members or the synergies between them are strong enough.

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File URL: http://dept.econ.yorku.ca/research/workingPapers/working_papers/2006/auctalmhombid-wp-lebrun.pdf
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Paper provided by York University, Department of Economics in its series Working Papers with number 2006_7.

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Length: 46 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:yca:wpaper:2006_7
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  1. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
  2. Lebrun, Bernard, 1997. "First Price Auctions in the Asymmetric N Bidder Case," Cahiers de recherche 9715, Université Laval - Département d'économique.
  3. Bernard Lebrun, 2004. "Uniqueness of the Equilibrium in First-Price Auctions," Discussion Papers 1, York University, Department of Economics, revised May 2004.
  4. Fibich, Gadi & Gavious, Arieh & Sela, Aner, 2004. "Revenue equivalence in asymmetric auctions," Journal of Economic Theory, Elsevier, vol. 115(2), pages 309-321, April.
  5. Arozamena, Leandro & Cantillon, Estelle, 2001. "Investment Incentives in Procurement Auctions," CEPR Discussion Papers 2676, C.E.P.R. Discussion Papers.
  6. Thomas, Charles J., 1997. "Disincentives for cost-reducing investment," Economics Letters, Elsevier, vol. 57(3), pages 359-363, December.
  7. Marshall Robert C. & Meurer Michael J. & Richard Jean-Francois & Stromquist Walter, 1994. "Numerical Analysis of Asymmetric First Price Auctions," Games and Economic Behavior, Elsevier, vol. 7(2), pages 193-220, September.
  8. Waehrer, Keith, 1999. "Asymmetric private values auctions with application to joint bidding and mergers," International Journal of Industrial Organization, Elsevier, vol. 17(3), pages 437-452, April.
  9. Eric Maskin & John Riley, 2000. "Asymmetric Auctions," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 413-438.
  10. Lebrun, Bernard, 1998. "Comparative Statics in First Price Auctions," Games and Economic Behavior, Elsevier, vol. 25(1), pages 97-110, October.
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