The asymptotics of price and strategy in the buyer’s bid double auction

Abstract

In a model with correlated and interdependent values/costs, we identify for the buyer’s bid double auction the asymptotic distributions of the price and of two order statistics in the first order conditions for optimal bidding/asking, all of which are normal. Substitution of the asymptotic distributions into the first order conditions can permit the solution for approximately optimal bids/asks that provide insight into what is “ first order” in a trader’s strategic decision-making, which has been difficult to obtain through analysis of equilibrium.