Credit auctions and bid caps

David Lagziel

Games and Economic Behavior, 2019, vol. 113, issue C, 416-422

Abstract: In this paper we offer two contributions to the field of credit auctions. First, we compare first- and second-price credit auctions and provide solvency-dependent conditions such that one mechanism dominates the other in terms of expected payoffs of all the parties involved. In addition, we present a new possibility of using bid caps in credit auctions. We study the equilibria in the capped mechanisms and show that bid caps can increase the seller's expected payoff and, in some cases, the expected payoffs of all sides (a win–win situation).

Keywords: Credit auctions; Defaulting; First-price auctions; Second-price auctions; Bid-caps (search for similar items in EconPapers)
JEL-codes: D44 D82 G33 (search for similar items in EconPapers)
Date: 2019
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Working Paper: CREDIT AUCTIONS AND BID CAPS (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:113:y:2019:i:c:p:416-422

DOI: 10.1016/j.geb.2018.10.010

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