A BEJEAP Topics article.

Abstract

We consider two private-value auctions where the prize in one is higher than the prize in the other. We show that a separating equilibrium exists in which bidders with a high valuation attend the auction with the higher prize while bidders with a low valuation attend the auction with the lower prize. In addition, we prove that a weak separating equilibrium exists where the strong bidders attend the high prize auction while the weak bidders randomize and may attend either auction, although with a higher probability of attending the low prize auction. In the set of auctions with separating equilibrium, we find the optimal minimum bids that maximize a seller's expected revenue.

Submitted: January 15, 2009 · Accepted: August 20, 2009 · Published: September 3, 2009

Recommended Citation

Gavious, Arieh (2009) "Separating Equilibria in Public Auctions," The B.E. Journal of Economic Analysis & Policy: Vol. 9 : Iss. 1 (Topics), Article 37.
DOI: 10.2202/1935-1682.2183
Available at: http://www.bepress.com/bejeap/vol9/iss1/art37