First-Price Auction Implements Efficient Investments
7 Pages Posted: 29 Jul 2019
Date Written: August 15, 2017
This note shows that the first-price auction fully implements efficient investments when agents make not only ex ante but also ex post investments. The essential assumptions of our model are that (i) each agent can invest before and after participating in the auction under the same cost function and (ii) the cost functions are common knowledge among agents. In any equilibrium of our model, the most efficient agent always wins and makes the efficient level of investment.
Keywords: first-price auction, investment efficiency, full implementation
JEL Classification: D82, D44, D47
Suggested Citation: Suggested Citation