A Discrete Model of Discriminatory Price Auctions - an Alternative to Menezes-Monteiro

Board of Governors of the Federal Reserve System Finance and Economics Discussion Series (98-8)

Posted: 28 Jun 1998

See all articles by Hans H. Haller

Hans H. Haller

Virginia Polytechnic Institute & State University - Department of Economics

Yvan Lengwiler

University of Basel - Faculty of Business and Economics (WWZ)

Date Written: January 21, 1998

Abstract

Menezes and Monteiro, Math. Soc. Sci. (1995), show that a multi-unit discriminatory price auction does not have a pure strategy equilibrium unless one imposes some rather special conditions on the demand functions. This non-existence result might indicate a problem either with the underlying auction procedure (as Menezes and Monteiro suggest) or with the modelling approach (as we suggest). We observe that the non-existence problem disappears if bids must come in multiples of smallest units --- a realistic feature. Moreover, we show that most of the analysis can be recast in a discrete action model.

JEL Classification: D44, C72

Suggested Citation

Haller, Hans H. and Lengwiler, Yvan, A Discrete Model of Discriminatory Price Auctions - an Alternative to Menezes-Monteiro (January 21, 1998). Board of Governors of the Federal Reserve System Finance and Economics Discussion Series (98-8). Available at SSRN: https://ssrn.com/abstract=102620

Hans H. Haller (Contact Author)

Virginia Polytechnic Institute & State University - Department of Economics ( email )

3021 Pamplin Hall
Blacksburg, VA 24061
United States
540-231-7591 (Phone)
540-231-5097 (Fax)

Yvan Lengwiler

University of Basel - Faculty of Business and Economics (WWZ) ( email )

Peter Merian-Weg 6
PO Box
Basel, CH-4002
Switzerland
+41 61 267 3369 (Phone)

HOME PAGE: http://wwz.unibas.ch/lengwiler

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