Bidding in Common‐Value Auctions With an Unknown Number of Competitors

Stephan Lauermann and Andre Speit

Econometrica, 2023, vol. 91, issue 2, 493-527

Abstract: This paper studies a first‐price common‐value auction in which bidders do not know the number of their competitors. In contrast to the case of common‐value auctions with a known number of rival bidders, the inference from winning is not monotone, and a “winner's blessing” emerges at low bids. As a result, bidding strategies may not be strictly increasing, but instead may contain atoms. Moreover, an equilibrium fails to exist when the expected number of competitors is large and the bid space is continuous. Therefore, we consider auctions on a grid. On a fine grid, high‐signal bidders follow an essentially strictly increasing strategy, whereas low‐signal bidders pool on two adjacent bids on the grid. The solutions of a “communication extension” based on Jackson, Simon, Swinkels, and Zame (2002) capture the equilibrium bidding behavior in the limit, as the grid becomes arbitrarily fine.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://doi.org/10.3982/ECTA17793

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:emetrp:v:91:y:2023:i:2:p:493-527

Ordering information: This journal article can be ordered from
https://www.economet ... ordering-back-issues

Access Statistics for this article

Econometrica is currently edited by Guido W. Imbens

More articles in Econometrica from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().