Costly Signaling in Auctions 1

  title={Costly Signaling in Auctions 1},
  author={Johannes H{\"o}rner},
This paper analyzes a dynamic auction in which a fraction of each bid is sunk. Jump bidding is used by bidders to signal their private information. Bluffing (respectively Sandbagging) occurs when a weak (respectively strong) player seeks to deceive his opponent into thinking that he is strong (respectively weak). A player with a moderate valuation bluffs by making a high bid and drops out if his bluff is called. A player with a high valuation should vary his bids and should sometimes sandbag by… CONTINUE READING

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