 Bidding in Common-Value Auctions With an Uncertain Number of CompetitorsStephan Lauermann and Andre Speit () CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany Abstract: This paper studies a first-price common-value auction in which bidders are uncertain about the number of their competitors. It shows that this uncertainty invalidates classic findings for common-value auctions with a known number of rival bidders (Milgrom and Weber 1982). In particular, the inference from winning is no longer monotonic, and a “winner’s blessing” emerges at low bids. As a result, bidding strategies may not be strictly increasing but instead contain atoms. The location of the atoms is indeterminate, implying equilibrium multiplicity. 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. For the equilibrium characterization, we utilize a “communication extension” based on Jackson et al. (2002). Keywords: common-value auctions; random player games; numbers uncertainty; Poisson games; endogenous tie-breaking; non-existence (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2019_136 Access Statistics for this paper More papers in CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany Kaiserstr. 1, 53113 Bonn , Germany. |
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