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Theoretical approaches to lowest unique bid auctions

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  • Costa-Gomes, Miguel A.
  • Shimoji, Makoto

Abstract

In this paper, we analyze a game called the lowest unique bid auction (LUBA). It is known that there is no closed form solution for the symmetric mixed strategy equilibria in LUBA. We propose two alternative approaches. We use weak dominance to identify upper bounds for players’ bids. Under symmetry, we provide a method to compute a mixed strategy equilibrium by utilizing the recursive structure of the winning chances of the bids under one assumption.

Suggested Citation

  • Costa-Gomes, Miguel A. & Shimoji, Makoto, 2014. "Theoretical approaches to lowest unique bid auctions," Journal of Mathematical Economics, Elsevier, vol. 52(C), pages 16-24.
    • Handle: RePEc:eee:mateco:v:52:y:2014:i:c:p:16-24
    DOI: 10.1016/j.jmateco.2014.02.011
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    References listed on IDEAS

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    1. Myerson, Roger B., 2000. "Large Poisson Games," Journal of Economic Theory, Elsevier, vol. 94(1), pages 7-45, September.
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    Cited by:

    1. Yamada, Takashi & Hanaki, Nobuyuki, 2016. "An experiment on Lowest Unique Integer Games," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 463(C), pages 88-102.
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