Asymmetric Auctions with Discretely Distributed Valuations

Muhammed Ceesay, Nicola Doni and Domenico Menicucci

Working Papers - Economics from Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa

Abstract: We examine a two-bidder auction setting in which the distributions for the bidders’ valuations are asymmetric over a support consisting of three elements. For the first price auction we derive the unique Bayes Nash Equilibrium in closed form, which allows to obtain more precise results with respect to the classical results in the literature on how asymmetries affect equilibrium bidding. Then we compare the revenue in the first price auction with the revenue in the second price auction. The latter is often superior to the former and we determine precisely, given a distribution for the value of the weak bidder, when a distribution for the value of the strong bidder exists such that the first price auction is superior to the second auction. For two particular asymmetries, shift and stretch, we show that in our setting the results are quite different from the results which are well-known in the literature.

Keywords: Asymmetric auctions; First price auction; Second price auction; Revenue ranking (search for similar items in EconPapers)
JEL-codes: D44 D82 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2024
New Economics Papers: this item is included in nep-des, nep-gth and nep-mic
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