Endogenous entry in lowest-unique sealed-bid auctions
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.
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