Alcalde, Jose and Dahm, Matthias (2010): On the Complete Information First--Price Auction and its Intuitive Solution.
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Despite the popularity of auction theoretical thinking, it appears that no one has presented an elementary equilibrium analysis of the complete information first-price sealed-bid auction mechanism when the bidding space has a finite grid. This paper aims to remedy that omission. We show that there always exists a "high price equilibrium" which can be considered "the intuitive solution" (an agent with the highest valuation wins the auction bidding at the second-highest valuation). Although there might be other "low price equilibria", we also show that when there are two bidders "the intuitive solution" is the unique limiting equilibrium when the grid size goes to zero and ties are randomly broken.
|Item Type:||MPRA Paper|
|Original Title:||On the Complete Information First--Price Auction and its Intuitive Solution|
|Keywords:||First-price auctions; undominated Nash equilibria.|
|Subjects:||D - Microeconomics > D4 - Market Structure and Pricing > D44 - Auctions
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games
|Depositing User:||Jose Alcalde|
|Date Deposited:||25. Apr 2010 23:18|
|Last Modified:||12. Feb 2013 11:02|
Alcalde, José and Matthias Dahm (2008): "The Complete Information First-Price Auction or the Importance of Being Indivisible" Working Paper 11-2008, Universitat Rovira i Virgili.
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