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A dual formulation of bidding behaviour in sealed bid auctions

Author

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  • Sudhir A. Shah

    (Department of Economics, Delhi School of Economics)

Abstract

We formalise ‘bidding behaviour’ as a bidder’s choice of the ‘mean winning probability’ at the interim stage of first-price and second-price sealed bid auctions. This formulation simplifies and sharpens the anal-ysis of bidding behaviour by virtue of confining it to the unit interval. As an application, we show that the optimal mean winning probability increases if and only if the bidder’s valuation of the prize increases. Our formulation of bidding behaviour is rationalised by duality results showing that optimal mean winning probabilities correspond to opti-mal bid distributions. JEL Code: D44

Suggested Citation

  • Sudhir A. Shah, 2024. "A dual formulation of bidding behaviour in sealed bid auctions," Working papers 349, Centre for Development Economics, Delhi School of Economics.
    • Handle: RePEc:cde:cdewps:349
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    References listed on IDEAS

    as
    1. Hopkins Ed & Kornienko Tatiana, 2007. "Cross and Double Cross: Comparative Statics in First Price and All Pay Auctions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 7(1), pages 1-25, May.
    2. Lebrun, Bernard, 1998. "Comparative Statics in First Price Auctions," Games and Economic Behavior, Elsevier, vol. 25(1), pages 97-110, October.
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    More about this item

    Keywords

    first-price auction; second-price auction; mean winning probability; bidding behaviour; duality;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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