Research Article
Approximation of Large Games with Applications to Uniform Price Auctions
@INPROCEEDINGS{10.1007/978-3-642-30913-7_13, author={Aaron Bodoh-Creed}, title={Approximation of Large Games with Applications to Uniform Price Auctions}, proceedings={Auctions, Market Mechanisms, and Their Applications. Second International ICST Conference, AMMA 2011, NewYork, NY, USA, August 22-23, 2011, Revised Selected Papers}, proceedings_a={AMMA}, year={2012}, month={10}, keywords={Approximate Equilibrium Large Games Uniform Price Auction Rational Expectations Equilibrium. JEL Codes: C72 D44 D5}, doi={10.1007/978-3-642-30913-7_13} }- Aaron Bodoh-Creed
Year: 2012
Approximation of Large Games with Applications to Uniform Price Auctions
AMMA
Springer
DOI: 10.1007/978-3-642-30913-7_13
Abstract
We provide a framework justifying the use of nonatomic limit model approximations to analyze the large market behavior of otherwise intractable game-theoretic models. We demonstrate continuity requirements on the economic primitives sufficient for the equilibrium strategies of the two models to converge as the number of participants in the large finite game approaches infinity. We apply our analysis framework to show that the equilibrium of a large interdependent values uniform price auction model where bidders have complementary preferences for multiple units can be approximated by a nonatomic exchange economy. We prove that the uniform price auction asymptotically aggregates idiosyncratic bidder information into market price and that the uniform price auction is approximately efficient with a large number of participants in the private values or single unit demand case.
