Three-object two-bidder simultaneous auctions chopsticks and.pdfVIP

Games and Economic Behavior 44 (2003) 114–133 /locate/geb Three-object two-bidder simultaneous auctions: chopsticks and tetrahedra Balázs Szentes ∗ and Robert W. Rosenthal 1 Department of Economics, University of Chicago, 1126 East 59th Street, Chicago, IL 60637, USA Received 31 October 2001 Abstract Symmetric equilibria are constructed for a class of symmetric auction games. The games all have two identical bidders bidding in three simultaneous first-price sealed-bid auctions for identical objects. Information is complete and the bidders’ marginal valuations increase for the second object and then decrease for the third. In all cases the support of the mixture that generates the equilibrium is two-dimensional, and it surrounds a three-dimensional set of best responses. This appears to be a previously unknown structure.  2003 Elsevier Science (USA). All rights reserved. JEL classification: D44 Keywords: Equilibrium; Exposure problem; First-price; Second-price 1. Introduction Offshore oil leases and spectrum licenses are examples of objects sold by the US government through simultaneous auctions of one kind or another. Other examples of simultaneous auctions are abundant around the world. Situations for which a simultaneous design is often recommended are when a bidder’s valuation for one object is typically dependent on what other objects the bidder may win. A simultaneous auction allows bidders to express their preferences over sets of objects through their bids, although it does not necessarily result in an assignment that is either efficient or revenue maximizing for the seller. * Corresponding author. E-mail address: szentes@ (B. Szentes).