Equilibrium Bidding without the Independence Axiom: A Graphical Analysis

Grimm V, Schmidt U (2000)

Publication Language: English

Publication Type: Journal article

Publication year: 2000


Publisher: Springer Verlag (Germany)

Book Volume: 49

Pages Range: 361-374

Journal Issue: 4

URI: http://link.springer.com/article/10.1023%2FA%3A1026585831556

DOI: 10.1023/A:1026585831556


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.

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

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