Pure Strategy Equilibria of Single and Double Auctions with Interdependent Values

16 Pages Posted: 29 Sep 2013

See all articles by Aloisio Araujo

Aloisio Araujo

Getulio Vargas Foundation (FGV) - FGV/EPGE Escola Brasileira de Economia e Finanças

Luciano I. de Castro

Tippie College of Business; IMPA

Date Written: Jan 06, 2009

Abstract

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

Suggested Citation

Araujo, Aloisio and de Castro, Luciano I., Pure Strategy Equilibria of Single and Double Auctions with Interdependent Values (Jan 06, 2009). Games and Economic Behavior, Vol. 65, No. 1, 2009, Available at SSRN: https://ssrn.com/abstract=2330502

Aloisio Araujo (Contact Author)

Getulio Vargas Foundation (FGV) - FGV/EPGE Escola Brasileira de Economia e Finanças ( email )

Praia de Botafogo 190/1125, CEP
Rio de Janeiro RJ 22253-900
Brazil

Luciano I. De Castro

Tippie College of Business ( email )

108 Pappajohn Building
Iowa City, IA 52242
United States

HOME PAGE: http://https://lucianodecastro.net/

IMPA ( email )

Estrada Dona Castorina 110
Jardim Botanico
Rio de Janeiro, 22460
55 21 2529 5168 (Phone)
55 21 2529 5129 (Fax)

HOME PAGE: www.impa.br/~luciano

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