On the lowest-winning-bid and the highest-losing-bid auctions
Mezzetti, Claudio and Tsetlin, Ilia (2007) On the lowest-winning-bid and the highest-losing-bid auctions. Working Paper. Coventry: University of Warwick, Department of Economics. Warwick economic research papers (No.832).
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Theoretical models of multi-unit, uniform-price auctions assume that the price is given by the highest losing bid. In practice, however, the price is usually given by the lowest winning bid. We derive the equilibrium bidding function of the lowest-winning-bid auction when there are k objects for sale and n bidders with unit demand, and prove that it converges to the bidding function of the highest-losing-bid auction if and only if the number of losers n - k gets large. When the number of losers grows large, the bidding functions converge at a linear rate and the prices in the two auctions converge in probability to the expected value of an object to the marginal winner.
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||H Social Sciences > HF Commerce|
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Auctions -- Mathematical models, Information asymmetry, Game theory, Mathematical models, Econometric models|
|Series Name:||Warwick economic research papers|
|Publisher:||University of Warwick, Department of Economics|
|Place of Publication:||Coventry|
|Official Date:||30 November 2007|
|Number of Pages:||18|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
|Version or Related Resource:||Mezzetti, C. and Tsetlin, I. (2008). On the lowest-winning-bid and the highest-losing-bid auctions. Journal of Mathematical Economics, 44(9-10), pp. 1040-1048. http://wrap.warwick.ac.uk/id/eprint/29795|
Bikhchandani, S. and J. Riley (1991): Equilibria in Open Common Value Auctions, Journal of Economic Theory, 53, 101-130.
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