This paper considers a very general class of single or multi-unit auctions of indivisible objects. The model allows for interdependent values, multidiminensional types and any attitude towards risk. Assuming only optimal behavior, we prove that each bid is chosen in order to equalize the marginal benefit to the marginal cost of bidding. This generalizes many existing results in the literature. We use this characterization to obtain sufficient conditions for truthful bidding, monotonic best reply strategies and identification results for multi-unit auctions.
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Abstract
This paper considers a very general class of single or multi-unit auctions of indivisible objects. The model allows for interdependent values, multidiminensional types and any attitude towards risk. Assuming only optimal behavior, we prove that each bid is chosen in order to equalize the marginal benefit to the marginal cost of bidding. This generalizes many existing results in the literature. We use this characterization to obtain sufficient conditions for truthful bidding, monotonic best reply strategies and identification results for multi-unit auctions.
JEL classification:
C62, C72, D44, D82
Keywords:
Multi-unit auctions, First-order conditions, Truth-telling, Identification, Monotonic best-reply
Citation:
de Castro, L. and Riascos, A. (2009): “Characterization of Bidding Behavior in Multi-Unit Auctions,” Journal of Mathematical Economics, 45, 559-575.