Separating Equilibria in Public Auctions

Arieh Gavious ()

The B.E. Journal of Economic Analysis & Policy, 2009, vol. 9, issue 1, 19

Abstract: We consider two private-value auctions where the prize in one is higher than the prize in the other. We show that a separating equilibrium exists in which bidders with a high valuation attend the auction with the higher prize while bidders with a low valuation attend the auction with the lower prize. In addition, we prove that a weak separating equilibrium exists where the strong bidders attend the high prize auction while the weak bidders randomize and may attend either auction, although with a higher probability of attending the low prize auction. In the set of auctions with separating equilibrium, we find the optimal minimum bids that maximize a seller's expected revenue.

Keywords: auctions; separating equilibrium; selling mechanisms; private information (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (2)

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DOI: 10.2202/1935-1682.2183

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