Costly Signalling in Auctions -super-1

Johannes Hörner and Nicolas Sahuguet

The Review of Economic Studies, 2007, vol. 74, issue 1, 173-206

Abstract: This paper analyses a dynamic auction in which a fraction of each bid is sunk. Jump bidding is used by bidders to signal their private information. Bluffing (respectively sandbagging) occurs when a weak (respectively strong) player seeks to deceive his opponent into thinking that he is strong (respectively weak). A player with a moderate valuation bluffs by making a high bid and drops out if his bluff is called. A player with a high valuation should vary his bids and should sometimes sandbag by bidding low, to induce lower bids by his rival. Copyright 2007, Wiley-Blackwell.

Date: 2007
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