Department

Economics, Finance and Quantitative Analysis

Document Type

Article

Publication Date

4-2017

Embargo Period

7-18-2018

Abstract

Restricting attention to players who use pure strategies, Tauman (2002) proves that in a k-price auction (k> 3) for every Nash equilibrium in which no player uses a weakly dominated strategy: (i) the bidder with the highest value wins the auction and (ii) pays a price higher than the second-highest value among the players, thereby generating more revenue for the seller than would occur in a first- or second-price auction. We show that these results do not necessarily hold when mixed strategies are allowed. In particular, we construct an equilibrium for k > 4 in which the second-highest valued player wins the auction and makes an expected payment strictly less than her value. This equilibrium–which exists for any generic draw of player valuations–involves only one player using a nondegenerate mixed strategy, for which the amount of mixing can be made arbitrarily small.

Journal Title

Economics Letters

Journal ISSN

0165-1765

Volume

153

First Page

6

Last Page

8

Digital Object Identifier (DOI)

10.1016/j.econlet.2017.01.020

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