Non-bidding equilibrium in an ascending core-selecting auction

This paper investigates the perfect Bayesian equilibrium in an ascending-price core-selecting auction, which was recently used in the U.K. spectrum auction. We suppose that there are two goods, two local, and one global bidders. The local bidders demand only one of the goods, whereas the global bidder wants both. Although local bidders generally face the threshold problem and have incentives to underbid, once a bidder becomes a unique remaining local bidder, he bids truthfully. This implies that stopping early induces the remaining bidder to behave truthfully. Either local bidder stops bidding at the beginning in the equilibrium. JEL code: D44