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A STUDY IN AUCTION THEORY AND A SCENARIO IN CHEATING IN ENGLISH AUCTIONS
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Auction theory is a part of game theory that studies human behavior in auction markets and resulting market outcomes. Research in this area, which is admittedly lacking, suggests that cheating is a risk that players sometimes find profitable to take. Within this body of literature, researchers are inevitably beginning to investigate cheating scenarios. In order to model real-life problems using the tools that these theories give us, a model of a cheating scenario in an English auction is proposed in this thesis. We find Nash equilibrium for this model by modifying the settings of the scenario. These Nash equilibria “make sense” in terms of reacting in the right way to changes in model parameters. As we generalize the situation, we find that the results follow well-known results in auction theory; therefore, we can verify that our proposed model works for this scenario.