Monotonicity in Asymmetric First-Price Auctions with Affiliation

Posted: 14 Jan 2008

See all articles by David McAdams

David McAdams

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA)

Abstract

I study monotonicity of equilibrium strategies in first-price auctions with symmetric bidders, risk-aversion, affiliated types, and interdependent values. I prove that every mixed-strategy equilibrium is outcome equivalent to a monotone pure strategy equilibrium under the priority rule for breaking ties. This provides a missing link to establish uniqueness in Milgrom and Weber (1982)'s general symmetric model. 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.

Keywords: Asymmetric First-price Auctions, Asymmetric Bidders, Mixed Strategy Equilibrium

Suggested Citation

McAdams, David, Monotonicity in Asymmetric First-Price Auctions with Affiliation. International Journal of Game Theory, Vol. 35, No. 3, 2007; MIT Sloan Working Paper No. 4256-02. Available at SSRN: https://ssrn.com/abstract=1083697 or http://dx.doi.org/10.2139/ssrn.321425

David McAdams (Contact Author)

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA) ( email )

77 Massachusetts Avenue
Cambridge, MA 02139-4307
United States
617-253-1306 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
263
PlumX Metrics