Monotonicity in asymmetric first-price auctions with affiliation |
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Authors: | David McAdams |
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Institution: | (1) Massachusetts Institute of Technology, E52-448, 50 Memorial Drive, Cambridge, MA 02144, USA |
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Abstract: | I study monotonicity of equilibrium strategies in first-price auctions with asymmetric bidders, risk aversion, affiliated
types, and interdependent values. Every mixed-strategy equilibrium is shown to be outcome-equivalent to a monotone pure-strategy
equilibrium under the “priority rule” for breaking ties. This provides a missing link to establish uniqueness in the “general
symmetric model” of Milgrom and Weber (Econometrica 50:1089–1122, 1982). Non-monotone equilibria can exist under the “coin-flip
rule” but they are distinguishable: all non-monotone equilibria have positive probability of ties whereas all monotone equilibria
have zero probability of ties. This provides a justification for the standard empirical practice of restricting attention
to monotone strategies.
Hendricks et al. (2003) provide an overview of recent empirical work. For a survey of experimental work, see Kagel and Levin
(2002). |
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Keywords: | First-price auctions Monotonicity Asymmetric auctions |
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