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Solution for One-Stage Bidding Game with Incomplete Information

P. 268-285.
Sandomirskaia M., Domansky V. C.

We investigate a model of one-stage bidding between two differently informed stockmarket agents for a risky asset (share). The random liquidation price of a share may take two values: the integer positive m with probability p and 0 with probability 1p. Player 1 (insider) is informed about the price, Player 2 is not. Both players know the probability p. Player 2 knows that Player 1 is an insider. Both players propose simultaneously their bids. The player who posts the larger bid buys one share from his opponent for this price. Any integer bids are admissible. The model is reduced to a zero-sum game with lack of information on one side. We construct the solution of this game for any p and m: we find the optimal strategies of both players and describe recurrent mechanism for calculating the game value. The results are illustrated by means of computer simulation.

В книге

Solution for One-Stage Bidding Game with Incomplete Information
Iss. 5. St. Petersburg: Graduate School of Management, St. Petersburg University, 2012.