Abstract
The present note analyzes the simultaneous ascending-bid auction with arbitrarily many asymmetric bidders with decreasing marginal valuations under complete information. We show that the game is solvable by iterated elimination of weakly dominated strategies if the efficient allocation assigns at least one unit to every player and if bid increments are sufficiently small. In that unique equilibrium, bidders immediately reduce their demand to the efficient allocation, and the auction ends in the first round of bidding.
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We would like to thank seminar participants at UC Davis, in particular Klaus Nehring and Louis Makowski for comments. Financial support by the Alexander–von–Humboldt Foundation through a Feodor–Lynen grant and by the Deutsche Forschungsgemeinschaft, SFB Transregio 15, “Governance and Efficiency of Economic Systems” is gratefully acknowledged.
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Riedel, F., Wolfstetter, E. Immediate demand reduction in simultaneous ascending-bid auctions: a uniqueness result. Economic Theory 29, 721–726 (2006). https://doi.org/10.1007/s00199-005-0039-5
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DOI: https://doi.org/10.1007/s00199-005-0039-5