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A note on the wallet game with discrete bid levels

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  • Gonçalves, Ricardo
  • Ray, Indrajit

Abstract

It is well-known that in the wallet game with two bidders, bidding twice the (individual) signal is an equilibrium. We prove that this strategy is never an equilibrium in a Japanese–English auction once discrete bid levels are introduced; we also discuss the implications of this result.

Suggested Citation

  • Gonçalves, Ricardo & Ray, Indrajit, 2017. "A note on the wallet game with discrete bid levels," Economics Letters, Elsevier, vol. 159(C), pages 177-179.
    • Handle: RePEc:eee:ecolet:v:159:y:2017:i:c:p:177-179
    DOI: 10.1016/j.econlet.2017.07.032
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    References listed on IDEAS

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    1. Sandro Brusco & Giuseppe Lopomo, 2004. "Collusion via Signalling in Simultaneous Ascending Bid Auctions with Heterogeneous Objects, with and without Complementarities," Levine's Bibliography 122247000000000385, UCLA Department of Economics.
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    4. Ricardo Gonçalves & John Hey, 2018. "Experimental Evidence On English Auctions: Oral Outcry Versus Clock," World Scientific Book Chapters, in: Experiments in Economics Decision Making and Markets, chapter 20, pages 427-466, World Scientific Publishing Co. Pte. Ltd..
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    6. Sandro Brusco & Giuseppe Lopomo, 2002. "Collusion via Signalling in Simultaneous Ascending Bid Auctions with Heterogeneous Objects, with and without Complementarities," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(2), pages 407-436.
    7. Klemperer, Paul, 1998. "Auctions with almost common values: The 'Wallet Game' and its applications," European Economic Review, Elsevier, vol. 42(3-5), pages 757-769, May.
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    10. Christopher Avery & John H. Kagel, 1997. "Second‐Price Auctions with Asymmetric Payoffs: An Experimental Investigation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(3), pages 573-603, September.
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    Cited by:

    1. Itzhak Rasooly & Carlos Gavidia-Calderon, 2020. "The importance of being discrete: on the inaccuracy of continuous approximations in auction theory," Papers 2006.03016, arXiv.org, revised Aug 2022.
    2. Fabio Michelucci, 2022. "Promoting Entry and Efficiency via Reserve Prices," Games, MDPI, vol. 13(4), pages 1-7, June.

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    More about this item

    Keywords

    Japanese–English auctions; Wallet game; Discrete bids;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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