Monotonicity and Rationalizability in a Large First Price Auction

S-Tier
Journal: Review of Economic Studies
Year: 2005
Volume: 72
Issue: 4
Pages: 1031-1055

Score contribution per author:

8.073 = (α=2.02 / 1 authors) × 4.0x S-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

This paper proves that the monotonicity of bidding strategies together with the rationality of bidders implies that the winning bid in a first price auction converges to the competitive equilibrium price as the number of bidders increases (<xref ref-type="bibr" rid="R18">Wilson, 1977</xref>). Instead of analysing the symmetric Nash equilibrium, we examine rationalizable strategies (<xref ref-type="bibr" rid="R3">Bernheim (1984)</xref>, <xref ref-type="bibr" rid="R11">Pearce (1984)</xref>) among the set of monotonic bidding strategies to prove that any monotonic rationalizable bidding strategy must be within a small neighbourhood of the "truthful" valuation of the object, conditioned on the signal received by the bidder. We obtain an information aggregation result similar to that of <xref ref-type="bibr" rid="R18">Wilson (1977)</xref>, while dispensing with almost all symmetric assumptions and using a milder solution concept than the Nash equilibrium. In particular, if every bidder is ex ante identical, then any rationalizable bidding strategy must be within a small neighbourhood of the symmetric Nash equilibrium. In a symmetric first price auction, the symmetry of outcomes is implied rather than assumed. Copyright 2005, Wiley-Blackwell.

Technical Details

RePEc Handle
repec:oup:restud:v:72:y:2005:i:4:p:1031-1055
Journal Field
General
Author Count
1
Added to Database
2026-01-25