Keywords: Discriminatory price auction, mixed strategies, existence of equilibrium, integer constraints
Abstract: Menezes and Monteiro, Math. Soc. Sci. (1995), show that a multi-unit
discriminatory price auction does not have a pure strategy equilibrium
unless one imposes some rather special conditions on the demand
functions. This non-existence result might indicate a problem either
wirh the underlying auction procedure (as Menezes and Monteiro
suggest) or with the modelling approach (as we suggest). We observe
that the non-existence problem disappears if bids must come in
multiples of smallest units --- a realistic feature. Moreover, we show
that most of the analysis can be recast in a discrete action model.
Full paper (231 KB PDF)
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