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Affiliated Common Value Auctions with Differential Information: The Two Bidder Case

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  • Parreiras Sergio O.

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    (University of North Carolina, Chapel Hill)

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    Abstract

    I study affiliated, pure common-value auctions with ex-ante asymmetric buyers. For the two-buyer case I characterize and prove uniqueness of the equilibrium of hybrid auctions where the payment is a weighted average of the highest and second-highest bids. A recursive method to explicitly compute the equilibrium is presented. It is shown that any hybrid auction yields at least as much revenue as the first-price auction. In particular, the equilibrium of the second-price auction, obtained in the limit by letting the weight of the highest bid go to zero, revenue-dominates the first-price auction.

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    Bibliographic Info

    Article provided by De Gruyter in its journal The B.E. Journal of Theoretical Economics.

    Volume (Year): 6 (2006)
    Issue (Month): 1 (December)
    Pages: 1-19

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    Handle: RePEc:bpj:bejtec:v:contributions.6:y:2006:i:1:n:12

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    Cited by:
    1. Harrison Cheng & Guofu Tan, 2010. "Asymmetric common-value auctions with applications to private-value auctions with resale," Economic Theory, Springer, vol. 45(1), pages 253-290, October.
    2. Bernard Lebrun, 2008. "First-Price, Second-Price, and English Auctions with Resale," Working Papers 2008_06, York University, Department of Economics.
    3. Fong, Yuk-fai & Garrett, Daniel F., 2010. "Bidding in a possibly common-value auction," Games and Economic Behavior, Elsevier, vol. 70(2), pages 494-501, November.
    4. Liu, Heng, 2014. "Equilibrium selection in common-value second-price auctions," Games and Economic Behavior, Elsevier, vol. 84(C), pages 1-6.

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