The Federal Reserve Board eagle logo links to home page<
Finance and Economics Discussion Series
The Finance and Economics Discussion Series logo links to FEDS home page A Discrete Model of Discriminatory Price Auctions--An Alternative to Menezes-Monteiro
Hans Haller and Yvan Lengwiler

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.

Keywords: Discriminatory price auction, mixed strategies, existence of equilibrium, integer constraints

Full paper (231 KB PDF) | Full paper (241 KB Postscript)

Home | Economic research and data | FR working papers | FEDS | 1998 FEDS papers
To comment on this site, please fill out our feedback form.
Last update: March 3, 1998