Endogenous entry in lowest-unique sealed-bid auctions
- 455 Downloads
Lowest-unique sealed-bid auctions are auctions with endogenous participation, costly bids, and the lowest bid among all unique bids wins. Properties of symmetric NEs are studied. The symmetric NE with the lowest expected gains is the maximin outcome under symmetric strategies, and it is the solution to a mathematical program. Comparative statics for the number of bidders, the value of the item and the bidding cost are derived. The two bidders’ auction is equivalent to the Hawk–Dove game. Simulations of replicator dynamics provide numerical evidence that the symmetric NE with the lowest expected gains is also asymptotically stable.
KeywordsSealed-bid auction Evolutionary stability Endogenous entry Maximin
JEL ClassificationD44 C72 C73 C61 L83
We are grateful to Quan Wen and Gerard van der Laan for valuable suggestions.
This article is distributed under the terms of the Creative Commons Attribution Noncommercial License which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
- Betounes D. (2001) Differential equations: Theory and applications with Maple. Springer, BerlinGoogle Scholar
- Brooke, A., Kendrick, D., Meeraus, A., & Raman, R. (1998). Gams: A users guide. Available at the GAMS Development Corporation web site at http://www.gams.com.
- Eichberger J., Vinogradov D. (2008) Least unmatched price auctions. University of Heidelberg, Mimeo, HeidelbergGoogle Scholar
- Houba, H., van der Laan, D., & Veldhuizen, D. (2008). The lowest-unique sealed-bid auction. TI Discussion Paper 08-049, Tinbergen Institute, Amsterdam/Rotterdam. Available at http://www.tinbergen.nl.
- Krishna V. (2002) Auction theory. Academic Press, San DiegoGoogle Scholar
- McKelvey, R., Richard, D., McLennan, A., & Turocy, T. (2006). Gambit: Software tools for game theory, version 0.2006.01.20. http://econweb.tamu.edu/gambit.
- Östling, R., Wang, J., Chou, E., & Camerer C. (2007). Field and lab convergence in poisson lupi games. SSE/EFI working paper series in Economics and Finance 671.Google Scholar
- Rapoport, A., Otsubo H., Kim B., & Stein W. (2007). Unique bid auctions: Equilibrium solutions and experimental evidence. Discussion Paper, University of Arizona.Google Scholar
- Weibull J. (1995) Evolutionary game theory. MIT Press, CambridgeGoogle Scholar