Using Economic Theory to Guide Numerical Analysis: Solving for Equilibria in Models of Asymmetric First-Price Auctions

Timothy Hubbard, Rene Kirkegaard and Harry Paarsch

No 207, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: In models of first-price auctions, when bidders are ex ante heterogenous, deriving explicit equilibrium bid functions is typically impossible, so numerical methods (such as polynomial approximations) are often employed to find approximate solutions. Recent theoretical research concerning asymmetric auctions has determined conditions under which equilibrium bid functions must cross. When equilibrium bid functions are approximated by low-order polynomials, however, such polynomials may not be flexible enough to satisfy the qualitative predictions of the theory. Plotting the relative expected pay-offs of bidders is a quick, informative way to decide whether the approximate solutions are consistent with theory.

Keywords: first-price auctions; asymmetric auctions; numerical methods (search for similar items in EconPapers)
JEL-codes: C20 D44 L1 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2011
New Economics Papers: this item is included in nep-cmp and nep-cta
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Using Economic Theory to Guide Numerical Analysis: Solving for Equilibria in Models of Asymmetric First-Price Auctions (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:207

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