Affiliation, Equilibrium Existence and Revenue Ranking of Auctions

Luciano De Castro

No 1530, Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science

Abstract: Affiliation has been a prominent assumption in the study of economic models with statistical dependence. Despite its large number of applications, especially in auction theory, affiliation has limitations that are important to be aware of. This paper shows that affiliation is a restrictive condition and the intuition usually given for its adoption may be misleading. Also, other usual justifications for affiliation are not compelling. Moreover, some implications of affiliation — namely, equilibrium existence in first-price auctions and the revenue dominance of second-price auctions — do not generalize to other definitions of positive dependence. JEL Classification Numbers: C62, C72, D44, D82.

Keywords: affiliation; positive dependence; statistical dependence of types; conditional independence; de Finetti’s theorem; minimally informative random variable; auctions; pure strategy equilibrium; revenue ranking. (search for similar items in EconPapers)
Date: 2010-12-01
New Economics Papers: this item is included in nep-mic
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Citations: View citations in EconPapers (13)

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