Theory and Decision

, Volume 71, Issue 2, pp 269–295

Endogenous entry in lowest-unique sealed-bid auctions

  • Harold Houba
  • Dinard van der Laan
  • Dirk Veldhuizen
Open Access
Article

Abstract

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.

Keywords

Sealed-bid auction Evolutionary stability Endogenous entry Maximin 

JEL Classification

D44 C72 C73 C61 L83 

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Copyright information

© The Author(s) 2010

Authors and Affiliations

  • Harold Houba
    • 1
  • Dinard van der Laan
    • 1
  • Dirk Veldhuizen
    • 2
  1. 1.Department of EconometricsVU University Amsterdam, Tinbergen InstituteAmsterdamNetherlands
  2. 2.SNS Reaal, Group Risk ManagementUtrechtThe Netherlands

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