Theoretical Economics, Volume 19, Number 1 ( 2024)

Theoretical Economics 19 (2024), 61–93

Worst-case equilibria in first-price auctions

Vitali Gretschko, Helene Mass


The usual analysis of bidding in first-price auctions assumes that bidders know the distribution of valuations. We analyze first-price auctions in which bidders do not know the precise distribution of their competitors' valuations, but only the mean of the distribution. We propose a novel equilibrium solution concept based on worst-case reasoning. We find an essentially unique and efficient worst-case equilibrium of the first-price auction, which has appealing properties from both the bidders' and the seller's point of view.

Keywords: Auctions, subjective-belief equilibria, uncertainty

JEL classification: D44, D81, D82

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