Person:

Mobius, Markus

We show the existence of a pure strategy, symmetric, increasing equilibrium in dou- ble auction markets with correlated, conditionally independent private values and many participants. The equilibrium we find is arbitrarily close to fully revealing as the market size grows. Our results provide strategic foundations for price-taking behavior in large markets.

This paper shows that larger auctions are more efficient than smaller ones, but that despite this scale effect, two competing and otherwise identical markets or auction sites of different sizes can coexist in equilibrium. We find that the range of equilibrium market sizes depends on the aggregate buyer—seller ratio, and also whether the markets are especially thin.