Equilibrium Bidding Strategies under the English and the Second-Price Auctions
When bidders have independent private valuations of a deterministic auctioned object, the revenue equivalence between the English auction and the second-price auction, is known in the auction literature.1 Several papers investigated bidding behavior when there is uncertainty in the value of the auctioned object. Chew (1989) observes that the symmetric Nash equilibrium bid under the second-price auction may not be demand revealing when bidders do not possess expected utility preferences. He further provides condition on bidders whose preferences exhibit the betweenness property to optimally bid less than their reservation values. Karni and Safra (1989) show that the Nash equilibrium bidding behavior under the English auction is demand revealing if and only if bidders’ preferences satisfy betweenness.
KeywordsNash Equilibrium Indifference Curve Bidding Strategy English Auction Equilibrium Bidding
Unable to display preview. Download preview PDF.
- Billingsley, P. (1968). Convergence of Probability Measures. NY: Wiley.Google Scholar
- Chew, S. H. and N. Nishimura (2001). “Revenue Non-Equivalence between the English and the Second-Price Auctions: Experimental Evidence.” Journal of Economic Behavior and Organization. Tentatively accepted.Google Scholar
- Coppinger, V, Smith, V, and J. Titus (1980). “Incentives and Behavior in English, Dutch, and Sealed-Bid Auctions:’ Economic Inquiry 1–22.Google Scholar
- Diamond, P. and J. Stiglitz (1974). “Increase in Risk and in Risk Aversion.” Journal of Economic Theory 3, 308–60.Google Scholar
- Fishbum, P. (1983). “Transitive Measurable Utility.” Journal of Economic Theory 31, 297–317.Google Scholar
- Glicksberg, I. L. (1952). “A Further Generalization of the Kakutani Fixed Point Theorem, with Application to Nash Equilibrium Points,” Proceedings of the American Mathematical Society 3, 170–4.Google Scholar
- Kagel, J. H. (1995). “Auctions: A Survey of Experimental Research” In The Handbook of Experimental Economics, edited by J. H. Kagel and A. E. Roth. Princeton: Princeton University Press.Google Scholar
- McAfee, R. P., and J. McMillan (1987). “Auctions and Bidding,” Journal of Economic Literature 25, 699–738.Google Scholar