Equilibrium selection in interdependent value auctions

Elnaz Bajoori, Dries Vermeulen

Research output: Working paper

486 Downloads (Pure)

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 and show that the efficient equilibrium defined by Milgrom \cite{Milgrom81} is a DSPE, while a class of less
intuitive, inefficient, equilibria introduced by Birulin \cite{Birulin2003} is not.
Original languageEnglish
Place of PublicationBath, U. K.
PublisherUniversity of Bath Department of Economics
Publication statusPublished - Dec 2017

Fingerprint Dive into the research topics of 'Equilibrium selection in interdependent value auctions'. Together they form a unique fingerprint.

Cite this