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Participation constraints in first-price auctions

Author

Listed:
  • Xiaoyong Cao

    (University of International Business and Economics)

  • Shao-Chieh Hsueh

    (School of Economics and Management at Xiamen University of Technology)

  • Guoqiang Tian

    (Texas A &M University)

  • Wei Wang

    (University of International Business and Economics)

Abstract

We study the endogenous participation problem when bidders are characterized by a two-dimensional private information on valuations and participation costs in first-price auctions. Bidders participate whenever their private costs are less than or equal to the expected revenue from participating. We show that there always exists an equilibrium in this general setting with two-dimensional types of ex-ante heterogeneous bidders. When bidders are ex-ante homogeneous, there is a unique symmetric equilibrium, but asymmetric equilibria may also exist. We provide conditions under which the equilibrium is unique (not only among symmetric ones). In the symmetric equilibrium, we show that the equilibrium cutoff of participation costs described above which bidders never participate, is lower when the distribution of participation costs is first-order stochastically dominated.

Suggested Citation

  • Xiaoyong Cao & Shao-Chieh Hsueh & Guoqiang Tian & Wei Wang, 2024. "Participation constraints in first-price auctions," International Journal of Game Theory, Springer;Game Theory Society, vol. 53(2), pages 609-634, June.
    • Handle: RePEc:spr:jogath:v:53:y:2024:i:2:d:10.1007_s00182-023-00884-x
    DOI: 10.1007/s00182-023-00884-x
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    References listed on IDEAS

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