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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

(p.13) 3 Private Values
An Introduction to Auction Theory

Flavio M. Menezes (Contributor Webpage)

Paulo K. Monteiro

Oxford University Press

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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