Separating equilibria in public auctions

Arieh Gavious

Research output: Contribution to journalArticlepeer-review

3 Scopus citations

Abstract

We consider two private-value auctions where the prize in one is higher than the prize in the other. We show that a separating equilibrium exists in which bidders with a high valuation attend the auction with the higher prize while bidders with a low valuation attend the auction with the lower prize. In addition, we prove that a weak separating equilibrium exists where the strong bidders attend the high prize auction while the weak bidders randomize and may attend either auction, although with a higher probability of attending the low prize auction. In the set of auctions with separating equilibrium, we find the optimal minimum bids that maximize a seller's expected revenue.

Original languageEnglish
Article number37
JournalB.E. Journal of Economic Analysis and Policy
Volume9
Issue number1
DOIs
StatePublished - 1 Jan 2009

Keywords

  • Auctions
  • Private information
  • Selling mechanisms
  • Separating equilibrium

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