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Asymmetric auctions with risk averse preferences

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  • Sanyyam Khurana

    (Department of Economics, Delhi School of Economics)

Abstract

In this paper, we characterize all the Bayesian equilibria of a firstprice auction for asymmetric bidders with risk averse preferences. The necessary conditions for an equilibrium are pure strategy, continuity and strict monotonicity. Next, we show that first-order stochastic dominance is a necessary condition and conditional stochastic dominance is a sufficient condition to unambiguously rank the bidding strategies. We establish bidders’ preferences for the first-price and the second-price auction under different types of risk aversion. Finally, for a special family of utility functions and distribution functions, we study the impact of asymmetry on seller’s revenue in a first-price auction.

Suggested Citation

  • Sanyyam Khurana, 2020. "Asymmetric auctions with risk averse preferences," Working papers 304, Centre for Development Economics, Delhi School of Economics.
    • Handle: RePEc:cde:cdewps:304
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    References listed on IDEAS

    as
    1. Bernard Lebrun, 1996. "Existence of an equilibrium in first price auctions (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(3), pages 421-443.
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    7. Lebrun, Bernard, 1999. "First Price Auctions in the Asymmetric N Bidder Case," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(1), pages 125-142, February.
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    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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