Equilibrium Bidding without the Independence Axiom: A Graphical Analysis

Journal article

Publication Details

Author(s): Grimm V, Schmidt U
Journal: Theory and Decision
Publisher: Springer Verlag (Germany)
Publication year: 2000
Volume: 49
Journal issue: 4
Pages range: 361-374
ISSN: 0040-5833
Language: English


In this paper we examine optimal bidding without the independence axiom in a unified framework which allows for a clear graphical representation. Thus, we can show very simply the independence axiom to be a necessary and sufficient condition on preferences for strategical equivalence of the two first-price and second-price auctions, respectively, and for the second-price sealed-bid auction to be demand revealing. The analysis reveals that the betweenness property is necessary and sufficient for the ascending-bid auction to be demand revealing while optimal bids exceed (are less than) bidders' valuations, iff preferences are quasiconcave (quasiconvex). Furthermore, it can be shown that fanning out (fanning in) leads to a higher (lower) selling-price in open than in sealed-bid auctions.

FAU Authors / FAU Editors

Grimm, Veronika Prof. Dr.
Lehrstuhl für Volkswirtschaftslehre, insbesondere Wirtschaftstheorie

How to cite

Grimm, V., & Schmidt, U. (2000). Equilibrium Bidding without the Independence Axiom: A Graphical Analysis. Theory and Decision, 49(4), 361-374. https://dx.doi.org/10.1023/A:1026585831556

Grimm, Veronika, and Ulrich Schmidt. "Equilibrium Bidding without the Independence Axiom: A Graphical Analysis." Theory and Decision 49.4 (2000): 361-374.


Last updated on 2018-28-07 at 00:23