Cheating in Second Price Auctions with Affiliated Values
نویسندگان
چکیده
We model cheating in second price auctions when valuations of bidders are affiliated. Bidders predict cheating behavior by an unfair seller who can observe the bids submitted by all bidders and then submits his extra bid to increase the payment of the winning bidder. We derive a symmetric equilibrium strategy in the cheating model. Moreover, we conduct a numerical analysis to compare a second price auction with a first price auction in terms of expected revenues with the possibility of cheating. The expected revenue of a non-cheating seller from a second price auction is still larger than that from a first price auction if two bidders’ belief for cheating are sufficiently small and the correlation between signals is large enough.
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