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On the lowest-winning-bid and the highest-losing-bid auctions

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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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Abstract

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
Dates:
DateEvent
30 November 2007Published
Number: No.832
Number of Pages: 18
Institution: University of Warwick
Status: Not Peer Reviewed
Access rights to Published version: Open Access
Funder: Insead
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
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