First-Price Auctions when the Ranking of Valuations

Elmar Wolfstetter, Michael Landsberger, Jakob Rubinstei and Shmuel Zamir ()
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Michael Landsberger: Hiafa University Israel
Jakob Rubinstei: Hiafa University Israel

Microeconomics from University Library of Munich, Germany

Abstract: We consider an augmented version of the symmetric private value auction model with independent types. The augmentation, intended to illustrate reality, concerns information bidders have about their opponents. To the standard assumption that every bidder knows his type and the distribution of types is common knowledge we add the assumption that the ranking of bidders' valuations is common knowledge. This set-up induces a particular asymmetric auction model that raises serious technical difficulties. We prove existence and uniqueness of equilibrium in pure strategies in the two bidder case. We also show that the model generally has no analytic solution. If the distribution of valuations is uniform, both bidders bid pointwise more aggressively relative to the standard symmetric case. However, this property does not apply to all distributions of valuations. Finally, we also provide a numerical solution of equilibrium bid functions for the uniform distribution case.

JEL-codes: D44 (search for similar items in EconPapers)
Date: 1997-01-24
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