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On the Lowest-Winning-Bid and the Highest-Losing-Bid Auctions

Claudio Mezzetti and Ilia Tsetlin

No 06/16, Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester

Abstract: Theoretical models of multi-unit, uniform-price auctions assume that the price is given by the highest losing bid. In practice, however, the price is usually given by the lowest winning bid. We derive the equilibrium bidding function of the lowest-winning-bid auction when there are k objects for sale and n bidders, and prove that it converges to the bidding function of the highest-losing-bid auction if and only if the number of losers n - k gets large. When the number of losers grows large, the bidding functions converge at a linear rate and the prices in the two auctions converge in probability to the expected value of an object to the marginal winner.

Keywords: Auctions; Lowest-Winning Bid; Highest-Losing Bid; k-th Price Auction; (k+1)-st Price Auction (search for similar items in EconPapers)
JEL-codes: D44 D82 (search for similar items in EconPapers)
Date: 2006-12
New Economics Papers: this item is included in nep-gth and nep-mic
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Related works:
Journal Article: On the lowest-winning-bid and the highest-losing-bid auctions (2008) Downloads
Working Paper: On the Lowest-Winning-Bid and the Highest-Losing-Bid Auctions (2007) Downloads
Working Paper: On the Lowest-Winning-Bid and the Highest-Losing-Bid Auctions (2007) Downloads
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