Joshevski, Dusko and Blazhekovikj Toshevski, Marina and Magdinceva-Shopova, Marija (2019) MYERSON-SATTERTHWAITE THEOREM AND ASYMMETRIC FPA AUCTIONS. In: 11th International Conference DIGITAL TRANSFORMATION OF THE ECONOMY AND SOCIETY: SHAPING THE FUTURE.
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Abstract
Abstract:
In this paper Myerson-Satterthwaite theorem with asymmetric First price auction (FPA) has been
subject of investigation. Bilateral inefficiency trade theorem versus the efficiency of the FPA auctions
in which there is supposedly no dominant strategy, where bids are private information, and are made
simultaneously, where highest bid wins and winning bidder pays the winning bid. This type of auction
may not be Pareto efficient (this condition requires that the item is allocated to the bidder with
highest valuation). But in the sealed FPA auctions highest bidder does not know other bidders’
valuations and may lose to another bidder. In the auction setting we set reserve price that causes
efficiency loss and decreases probability of trade. The results are ambiguous dependent on the type of
the solution method used. Three methods of solution were used: Fixed point finite difference
iterations, Backward shooting method, and Constrained strategic equilibrium (C.S.E). The reserve
price set was 0.5 since and , so the buyers’ value is likely to be and
the sellers’ value is likely to be ,so in such case reserve price would eliminate low bidder
types. The results are ambiguous in a sense that under Backward shooting method convergence is not
true, so the Myerson-Satterthwaite theorem does hold which is not case under Fixed finite difference
point iterations, and Constrained strategic equilibrium (C.S.E).Phenomenon known as winner’s curse
occurs in a case of incomplete information.
Key words: FPA, asymmetric auctions, C.S.E, Backward shooting method, Fixed point finite
difference iterations, winner’s curse
JEL classification: D44
| Item Type: | Conference or Workshop Item (Paper) |
|---|---|
| Subjects: | Scientific Fields (Frascati) > Social Sciences > Economics and Business |
| Divisions: | Faculty of Information and Communication Technologies |
| Depositing User: | Prof. d-r. Marina Blazekovic |
| Date Deposited: | 31 Aug 2023 15:58 |
| Last Modified: | 31 Aug 2023 15:58 |
| URI: | https://eprints.uklo.edu.mk/id/eprint/8775 |
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