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An Introduction to Auction Theory$
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Flavio M. Menezes and Paulo K. Monteiro

Print publication date: 2004

Print ISBN-13: 9780199275984

Published to Oxford Scholarship Online: April 2005

DOI: 10.1093/019927598X.001.0001

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Private Values

Private Values

Chapter:
(p.13) 3 Private Values
Source:
An Introduction to Auction Theory
Author(s):

Flavio M. Menezes (Contributor Webpage)

Paulo K. Monteiro

Publisher:
Oxford University Press
DOI:10.1093/019927598X.003.0003

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

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