Working Paper Series, Department of Economics, Copenhagen Business School
Equilibrium Selection with Risk Dominance in a Multiple-unit Unit Price Auction
Abstract: This paper uses an adapted version of the linear tracing
procedure, suggested by Harsanyi and Selten (1988), in order to
discriminate between two types of multiple Nash equilibria. Equilibria of
the same type are pay-off equivalent in the analysed multiple-unit unit
price auction where two sellers compete in order to serve a fixed demand.
The equilibria where the firm with the larger capacity bids the maximum
price, serves the residual demand and is undercut by the low capacity firm
that sells its total capacity risk dominate the equilibria where the roles
Keywords: na; (follow links to similar papers)
JEL-Codes: G10; (follow links to similar papers)
12 pages, January 1, 2008
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