An Ascending Auction for Independent Values: Uniqueness and Robustness to Strategic Uncertainty

Dirk Bergemann and Stephen Morris

No 1600, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We consider an single object auction environment with interdependent valuations and a generalized Vickrey-Clark-Groves allocation mechanism that allocates the object almost efficiently in a strict ex post equilibrium. If there is a significant amount of interdependence, there are multiple rationalizable outcomes of this direct mechanism and any other mechanism that allocates the object almost efficiently. This is true whether the agents know about each others' payoff types or not. We consider an ascending price dynamic version of the generalized VCG mechanism. When there is complete information among the agents of their payoff types, we show that the almost efficient allocation is the unique backward induction (i.e., extensive form rationalizable) outcome of the auction, even when there are multiple rationalizable outcomes in the static version. This example illustrates the role that open auctions may play in obtaining efficient allocations by reducing strategic uncertainty.

Keywords: Dynamic auction; Rationalizability; Extensive form; Uniqueness; Strategic uncertainty (search for similar items in EconPapers)
JEL-codes: C79 D82 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2007-01, Revised 2007-03
New Economics Papers: this item is included in nep-gth
Note: CFP 1207.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Published in American Economic Review Papers and Proceedings (May 2007), 97(2): 125-130

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