Study On The Bidders' Jump Bidding Strategy In The Acending Auctions

Previous literatures have discussed the motivation of jump bidding and shown the strategy of bidders'jump bidding would affect the equilibrium and revenue of ascending auctions. On the basis of the review of former literatures, this paper finds that the effect of jump bidding strategy on auction revenue depends on different auction framework or economic models of auction. Thus, firstly this paper divides the economic models of auctions into three different kinds: independent private value model, affliated value model and common value model. Secondly, this paper discusses the effect of jump bidding strategy on one-object auction revenue under the independent private value and affliated value models. Finally, the effect of jump bidding strategy on multiple-object auction revenue under the independent private value model is discussed. Based on the afore-mentioned studies, this paper gets main innovative conclusions as follow.(1)Basing on the assumptions of independent private value model, the jump bidding strategy is discussed in the paper. There is one seller who wishes to sell a single non-divisable object. We assume that the seller's valuation for the object is zero which implies she is willing to accept any strictly positive bid. The seller faces n+1 bidders; one of them we refer to as the special bidder and the others we call ordinary bidders. The special bidder draws her valuation from the distribution with a support over two non-overlapping intervals. Each ordinary bidder draws her valuation independently from the continuously differentiable distribution. The information contained in a jump bid must be sufficient to induce a discrete change in the bidding behaviour of the other bidders. We show that in a one-object auction a bidder benefits from jump bidding only if her distribution satisfies certain restrictive conditions and bidder identity is concealed. The more information that a seller conceals, the higher the jump bid a bidder is willing to make in order to signal her valuation and the larger is the set of jump bid equilibria.(2)This paper solves for equilibria for ascending auctions with affiliated values when jump bidding strategies may be employed to intimidate one's opponents. In these equilibria, jump bids serve as correlating devices which select asymmetric bidding functions to be played subsequently. Each possibility of jump bidding provides a Pareto improvement for the bidders from the symmetric equilibrium of a sealed bid, second-price auction. The expanded set of equilibria can approximate either first-price or second-price outcomes or produce exactly the set of expected prices between those two bounds.(3)In an auction for multiple items, the jump bid signals a high valuation by the jump bidder. This causes a discrete change in the bidding behaviour of the other bidder since it causes this bidder to reduce her demand. In both a one-object and multiple-object auctions, a seller may expect less revenue in a jump bid equilibrium than a non-jump bid equilibrium.