Pure Strategy Equilibria of Single and Double Auctions with Interdependent Values
16 Pages Posted: 29 Sep 2013
Date Written: Jan 06, 2009
We prove the existence of monotonic pure strategy equilibrium for many kinds of asymmetric auctions with n bidders and unitary demands, interdependent values and independent types. The assumptions require monotonicity only in the own bidder’s type. The payments can be a function of all bids. Thus, we provide a new equilibrium existence result for asymmetrical double auctions and a small number of bidders. The generality of our setting requires the use of special tie-breaking rules. We present an example of a double auction with interdependent values where all equilibria are trivial, that is, they have zero probability of trade. This is related to Akerlof’s “market for lemmons” example and to the “winner’s curse,” establishing a connection between them. However, we are able to provide sufﬁcient conditions for non-trivial equilibrium existence.
Keywords: C62, C72, D44, D82
JEL Classification: Equilibrium existence in auctions, Pure strategy Nash equilibrium, Monotonic equilibrium, Tie-breaki
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