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Equilibrium selection in common-value second-price auctions

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  • Liu, Heng

Abstract

This note considers equilibrium selection in common-value second-price auctions with two bidders. We show that for each ex post equilibrium in continuous and undominated strategies, a sequence of “almost common-value” auctions can be constructed such that each of them possesses a unique undominated and continuous equilibrium and the corresponding sequence of equilibria converges to that ex post equilibrium. As an implication, no equilibrium selection of this model based on perturbations seems to be more convincing than others.

Suggested Citation

  • Liu, Heng, 2014. "Equilibrium selection in common-value second-price auctions," Games and Economic Behavior, Elsevier, vol. 84(C), pages 1-6.
    • Handle: RePEc:eee:gamebe:v:84:y:2014:i:c:p:1-6
    DOI: 10.1016/j.geb.2013.12.003
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    References listed on IDEAS

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    1. Bikhchandani, Sushil & Riley, John G., 1991. "Equilibria in open common value auctions," Journal of Economic Theory, Elsevier, vol. 53(1), pages 101-130, February.
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    5. Larson, Nathan, 2009. "Private value perturbations and informational advantage in common value auctions," Games and Economic Behavior, Elsevier, vol. 65(2), pages 430-460, March.
    6. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
    7. Oleksii Birulin, 2003. "Inefficient ex-post equilibria in efficient auctions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 22(3), pages 675-683, October.
    8. Ronald M. Harstad & Dan Levin, 1985. "A Class of Dominance Solvable Common-Value Auctions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(3), pages 525-528.
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    Cited by:

    1. Bajoori, Elnaz & Vermeulen, Dries, 2019. "Equilibrium selection in interdependent value auctions," Mathematical Social Sciences, Elsevier, vol. 98(C), pages 47-56.
    2. Bajoori, Elnaz & Flesch, János & Vermeulen, Dries, 2016. "Behavioral perfect equilibrium in Bayesian games," Games and Economic Behavior, Elsevier, vol. 98(C), pages 78-109.
    3. Abraham, Ittai & Athey, Susan & Babaioff, Moshe & Grubb, Michael D., 2020. "Peaches, lemons, and cookies: Designing auction markets with dispersed information," Games and Economic Behavior, Elsevier, vol. 124(C), pages 454-477.

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    More about this item

    Keywords

    Equilibrium selection; Common value; Auctions;
    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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