Partnerships of Bidders with Constant Relative Risk Aversions

Abstract EN

In this paper, we study a dynamic auction for allocating a single indivisible project while different participants have different bid values for the project.

When the price rises continuously, the bidders can retreat the auction and obtain the compensation by the difference between the price at retreating time and the previous bid price.

The final successful bidder achieves the project and pays compensations to others.

We show that the auction of bidders with constant relative risk aversion (CRRA) has a unique equilibrium.

While the relative risk aversion coefficient approaches to zero, the equilibrium with CRRA bidders would approach to the equilibrium with risk-neutral bidders.