Chapter

Private Values

Flavio M. Menezes and Paulo K. Monteiro

in An Introduction to Auction Theory

Published in print November 2004 | ISBN: 9780199275984
Published online April 2005 | e-ISBN: 9780191602214 | DOI: http://dx.doi.org/10.1093/019927598X.003.0003
Private Values

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This chapter presents the Independent Private Values model, wherein bidders’ values for the object being auctioned off is a function of only their own types. The equilibrium bidding strategies and seller’s expected revenue in four distinct types of auctions (first- and second-price sealed-bid, English, and Dutch auctions) are computed. It is shown that bidders bid less than their valuations in the unique symmetric of a first-price auction, and bid their valuations in the unique symmetric equilibrium of the second-price auction.

Keywords: Independent Private Values model; auctions; equilibrium bidding; seller; first-price sealed-bid; second-price sealed-bid; English auction; Dutch auction; symmetric equilibrium

Chapter.  12557 words.  Illustrated.

Subjects: Microeconomics

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