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Article
Separating Equilibria in Public Auctions
The B.E. Journal of Economic Analysis & Policy (2010)
  • Arieh Gavious
Abstract

We consider two private-value auctions where the prize in one is higher than the prize in the other. We show that a separating equilibrium exists in which bidders with a high valuation attend the auction with the higher prize while bidders with a low valuation attend the auction with the lower prize. In addition, we prove that a weak separating equilibrium exists where the strong bidders attend the high prize auction while the weak bidders randomize and may attend either auction, although with a higher probability of attending the low prize auction. In the set of auctions with separating equilibrium, we find the optimal minimum bids that maximize a seller's expected revenue.

Keywords
  • auctions,
  • separating equilibrium,
  • selling mechanisms,
  • private information
Publication Date
December 5, 2010
Citation Information
Arieh Gavious. "Separating Equilibria in Public Auctions" The B.E. Journal of Economic Analysis & Policy Vol. 9 Iss. 1 (2010)
Available at: http://works.bepress.com/arieh_gavious/1/