Discussion Paper, Center for Mathematical Studies in Economics and Management Science 1530
Affiliation has been a prominent assumption in the study of economic models with statistical dependence. Despite its large number of applications, especially in auction theory, affiliation has limitations that are important to be aware of. This paper shows that affiliation is a restrictive condition and the intuition usually given for its adoption may be misleading. Also, other usual justifications for affiliation are not compelling. Moreover, some implications of affiliation - namely, equilibrium existence in first-price auctions and the revenue dominance of second-price auctions - do not generalize to other definitions of positive dependence.
affiliation positive dependence statistical dependence of types conditional independence de Finetti's theorem minimally informative random variable auctions pure strategy equilibrium revenue ranking