An Asymptotic Solution for Sealed Bid Common-Value Auctions with Bidders Having Asymmetric Information |
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Authors: | Michael C Laskowski Robert L Slonim |
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Institution: | a Department of Mathematics, University of Maryland, College Park, Maryland, 20742;b Department of Economics, Weatherhead School of Management, Case Western Reserve University, Cleveland, Ohio, 44106 |
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Abstract: | We investigate a first-price common-value auction where bidders have asymmetric information about an item of unknown value. We compute the unique Nash equilibrium when the bidders are constrained to translation-invariant bid functions. Further, this profile of bid functions is also an asymptotic Nash equilibrium (without the constraint on the bidders' strategies) as the a priori distribution of the true value becomes increasingly diffuse. All bidders have positive expected profits at equilibrium. In the second-price analogue with two bidders there is a continuum of Nash equilibria in which both bidders have positive expected profits. Journal of Economic Literature Classification Number: C7. |
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