Rationalizable outcomes of large private-value first-price discrete auctions

Eddie Dekel*, Asher Wolinsky

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

19 Scopus citations

Abstract

We consider discrete versions of first-price auctions. We present a condition on beliefs about players' values such that, with any fixed finite set of possible bids and sufficiently many players, only bidding the bid closest from below to one's true value survives iterative deletion of bids that are dominated, where the dominance is evaluated using beliefs that satisfy the condition. The condition holds in an asymmetric conditionally independent environment so long as the likelihood of each type is bounded from below. In particular, with many players, common knowledge of rationality and that all types are possible in an independent and private values auction implies that players will bid just below their true value.

Original languageEnglish (US)
Pages (from-to)175-188
Number of pages14
JournalGames and Economic Behavior
Volume43
Issue number2
DOIs
StatePublished - Jan 1 2003

Keywords

  • Common knowledge of rationality
  • Large auctions
  • Rationalizability

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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