Option values in sequential auctions with time-varying valuations (Q2021787): Difference between revisions

The paper is devoted to the analysis of sequential auctions with time-varying valuations, including arrival of bidders, in a context where bidders have complete information. Based on the entered definitions: ``An \textit{allocation profile} for \(V\) is a pair \((A, S)\) of functions \(A, S : G(V) \longmapsto \{0, 1,\ldots , n\}\) that specifies a tentative outcome of every possible bidding round. For each subgame \(U\) of \(V\), -- \(A(U)\) is the bidder with the highest valid bid in the first round of \(U\), or 0 indicating there are no valid bids. -- \(S(U)\) is the bidder with the second-highest valid bid in the first round of \(U\), or 0 indicating there are less than two valid bids.''; ``An allocation profile \(P = (A, S)\) is \textit{consistent} if, under the induced strategy profile \(\sigma^P\), for every subgame \(U\), \(A(U)\) is the highest bidder in the earliest round of \(U\), if there is one, or is 0 if there is none, and \(S(U)\) is the second-highest bidder in the earliest round of \(U\), if there is one, or is 0 if there is none.'' the authors prove the following result (see, Theorem 1): Every consistent allocation profile induces an option-value bidding strategy profile which is in subgame-perfect equilibrium, with non-negative utilities for all bidders, and vice versa. This result may be extended to a model with arrivals of bidders.