Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/97252
Authors: 
De Castro, Luciano
Year of Publication: 
2012
Series/Report no.: 
Discussion Paper, Center for Mathematical Studies in Economics and Management Science 1556
Abstract: 
Despite their importance, games with incomplete information and dependent types are poorly understood; only special cases have been considered and a general approach is not yet available. In this paper, we propose a new condition (named richness) for correlation of types in (asymmetric) Bayesian games. Richness is related to the idea that beliefs do not determine preferences and that types should be modeled with two explicit parts: one for payoffs and another for beliefs. With this condition, we are able to provide the first pure strategy equilibrium existence result for a general model of multi-unit auctions with correlated types. We then focus on a special case of richness, called grid distributions, and establish necessary and sufficient conditions for the existence of a symmetric monotonic pure strategy equilibrium in first-price auctions with general levels of correlation. We also provide a polynomial-time algorithm to verify this existence and suggest, using simulations, that the revenue superiority of English auctions may not hold for positively correlated types in general.
Subjects: 
dependence of types
pure strategy equilibrium existence
affiliation
games with incomplete information
quasi-supermodular games
revenue ranking of auctions
dependence of types
pure strategy equilibrium existence
affiliation
games with incomplete information
quasi-supermodular games
revenue ranking of auctions
JEL: 
C62
C72
D44
D82
Document Type: 
Working Paper

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