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Article
On the Complete Information First-Price Auction and its Intuitive Solution
International Game Theory Review (2011)
  • Jose Alcalde, University of Alicante
  • Matthias Dahm
Abstract
Despite 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.
Keywords
  • First-price auctions,
  • undominated Nash equilibria
Publication Date
2011
Citation Information
Jose 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/