Second Price Auctions with Valuations and Participation Costs Both Privately Informed

Cao, Xiaoyong and Tian, Guoqiang (2007): Second Price Auctions with Valuations and Participation Costs Both Privately Informed.

Abstract

This paper studies equilibria of second price auctions when valuations and participation costs are both private information with general distribution functions. We consider the existence and uniqueness of equilibrium in this general framework of two-dimensional types. It is shown that there always exists an equilibrium, and further there exists a unique symmetric equilibrium when all bidders are ex ante homogeneous. Moreover, we identify a sufficient condition under which there is a unique equilibrium in a heterogeneous economy with two bidders. Our general result includes many existing results as special cases.

• Item Type: MPRA Paper
• Language: English
• Keywords: Two-Dimensional Types, Private Values, Private Participation Costs, Second Price Auctions, Existence and Uniqueness of Equilibrium
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C62 - Existence and Stability Conditions of Equilibrium; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D44 - Auctions; D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency ; Cost-Benefit Analysis; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design

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