סמינר מחלקתי

Prebidding vs. Postbidding in First-Price Auctions with and without Head-Starts

Yizhaq Minchuk^[1] and Aner Sela^[2]

ABSTRACT:

We study the effect of prebidding and postbidding in first-price auctions with a single prize under incomplete information. All the bidders' values are private information except bidder 1's value which is commonly known. Bidder 1 places his bid either before (prebidding auction) or after (postbidding auction) all the other bidders. We show that for relatively small (high) values of bidder 1 the prebidding auction yields a lower (higher) expected highest bid than the postbidding auction. However, by giving optimal head-starts, the prebidding auction always yields a higher expected bid than the postbidding auction.

Keywords: First-price auctions, prebidding, postbidding, head-starts.