Abstract
It is well-known that in the wallet game with two bidders, bidding twice the (individual) signal is an equilibrium. We prove that this strategy is never an equilibrium in a Japanese–English auction once discrete bid levels are introduced; we also discuss the implications of this result.
Highlights
Contents lists available at ScienceDirectA Católica Porto Business School and CEGE, Universidade Católica Portuguesa, Rua Diogo Botelho, 1327, 4169-005 Porto, Portugal b Economics Section, Cardiff Business School, Cardiff University, Colum Drive, Cardiff CF10 3EU, UK highlights
It is well-known that in the wallet game with two bidders, bidding twice the signal is an equilibrium. We prove that this strategy is never an equilibrium in a Japanese–English auction once discrete bid levels are introduced; we discuss the implications of this result
Milgrom and Weber (1982) analysed a particular version of the English auction, the so-called Japanese–English Auction ( JEA), commonly known as a clock auction, in which the price of the object increases continuously and the bidders must keep on pressing a button whilst they are interested in buying the object at the posted price; the auction ends when all but one bidder release the button
Summary
A Católica Porto Business School and CEGE, Universidade Católica Portuguesa, Rua Diogo Botelho, 1327, 4169-005 Porto, Portugal b Economics Section, Cardiff Business School, Cardiff University, Colum Drive, Cardiff CF10 3EU, UK highlights. We analyse a Japanese–English auction with fixed bid levels for the wallet game. We prove that bidding twice the value of the private signal is never an equilibrium. Article history: Received May 2017 Received in revised form July 2017 Accepted 28 July 2017 Available online 7 August 2017. It is well-known that in the wallet game with two bidders, bidding twice the (individual) signal is an equilibrium. We prove that this strategy is never an equilibrium in a Japanese–English auction once discrete bid levels are introduced; we discuss the implications of this result
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