Multi-bidder First Price Auction with Beliefs

Abstract

This paper characterizes the set of equilibria in the first price auction with multiple bidders—specifically three bidders, each of whose type space is multi-dimensional, incorporating a bidder’s beliefs about others’ valuations. In this auction, each bidder independently and privately learns the other two opponents’ valuations with some probability. This paper derives closed form solutions for equilibrium bidding behaviours parameterized by the degree of information when the bidder has homogeneous beliefs regarding each opponent. This paper demonstrates how much the level of information affects the bidding behaviours of the informed bidders. In addition, this paper extends the model into [Formula: see text] bidders when a high value bidder has fixed beliefs that all other bidders are identical types, and show how the value of information changes as the number of participants increases. Finally, this paper speculates on the possible changes in the efficiency of the model from increasing the valuation space to an arbitrary number. JEL Classification: D44, D82, D83