Equilibrium selection in interdependent-value auctions

Elnaz Bajoori, Dries Vermeulen

Research output: Contribution to journalArticle

Abstract

In second-price auctions with interdependent values, bidders do not necessarily have dominant strategies. Moreover, such auctions may have many equilibria. In order to rule out the less intuitive equilibria, we define the notion of distributional strictly perfect equilibrium (DSPE) for Bayesian games with infinite type and action spaces. This equilibrium is robust against arbitrary small perturbations of strategies. We apply DSPE to a class of symmetric second-price auctions with interdependent values. We show that the efficient equilibrium defined by Milgrom, (1981) is a DSPE, while a class of less intuitive, inefficient, equilibria introduced by Birulin, (2003) is not.
LanguageEnglish
Pages47-56
Number of pages10
JournalMathematical Social Sciences
Volume98
Early online date12 Feb 2019
DOIs
StatusPublished - 1 Mar 2019

ASJC Scopus subject areas

  • Sociology and Political Science
  • Social Sciences(all)
  • Psychology(all)
  • Statistics, Probability and Uncertainty

Cite this

Equilibrium selection in interdependent-value auctions. / Bajoori, Elnaz; Vermeulen, Dries.

In: Mathematical Social Sciences, Vol. 98, 01.03.2019, p. 47-56.

Research output: Contribution to journalArticle

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