On the Complete Information First-Price Auction and its Intuitive SolutionInternational Game Theory Review (2011)
AbstractDespite the popularity of auction theoretical thinking, it appears that no one has presented an elementary equilibrium analysis of the complete information first-price sealed-bid auction mechanism when the bidding space has a finite grid. This paper aims to remedy that omission. We show that there always exists a ``high price equilibrium'' which can be considered ``the intuitive solution'' (an agent with the highest valuation wins the auction bidding at the second-highest valuation). Although there might be other ``low price equilibria'', we also show that when there are two bidders ``the intuitive solution'' is the unique limiting equilibrium when the grid size goes to zero and ties are randomly broken.
- First-price auctions,
- undominated Nash equilibria
Citation InformationJose Alcalde and Matthias Dahm. "On the Complete Information First-Price Auction and its Intuitive Solution" International Game Theory Review Vol. 13 Iss. 3 (2011)
Available at: http://works.bepress.com/jose_alcalde/25/