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Information acquisition in auctions: Sealed bids vs. open bids

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  • Hernando-Veciana, Ángel

Abstract

This paper studies the incentives of a bidder to acquire information in an auction when her information acquisition decision is observed by the other bidders before bidding. Our results show that the sealed bid (second price) auction may induce more information acquisition about a common component of the value than the open (English) auction but less about the private component of the value. Moreover, we show that more information about the private value and less information about the common value may improve efficiency and revenue. Consequently, our results suggest new arguments in favor of the open auction.

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  • Hernando-Veciana, Ángel, 2009. "Information acquisition in auctions: Sealed bids vs. open bids," Games and Economic Behavior, Elsevier, vol. 65(2), pages 372-405, March.
    • Handle: RePEc:eee:gamebe:v:65:y:2009:i:2:p:372-405
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    Cited by:

    1. Hernando-Veciana, Ángel & Tröge, Michael, 2011. "The insider's curse," Games and Economic Behavior, Elsevier, vol. 71(2), pages 339-350, March.
    2. Tri Vi Dang & Florian Morath, 2013. "The Taxation of Bilateral Trade with Endogenous Information," Working Papers tax-mpg-rps-2013-07, Max Planck Institute for Tax Law and Public Finance.
    3. Tristan Gagnon-Bartsch & Marco Pagnozzi & Antonio Rosato, 2021. "Projection of Private Values in Auctions," American Economic Review, American Economic Association, vol. 111(10), pages 3256-3298, October.
    4. Florian Morath, 2013. "Volunteering and the strategic value of ignorance," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 41(1), pages 99-131, June.
    5. Florian Morath & Johannes Münster, 2013. "Information acquisition in conflicts," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 54(1), pages 99-129, September.
    6. Lorentziadis, Panos L., 2016. "Optimal bidding in auctions from a game theory perspective," European Journal of Operational Research, Elsevier, vol. 248(2), pages 347-371.
    7. Tian, Guoqiang & Xiao, Mingjun, 2007. "Endogenous Information Acquisition on Opponents' Valuations in Multidimensional First Price Auctions," MPRA Paper 41214, University Library of Munich, Germany, revised Jan 2010.
    8. Arve, Malin & Honryo, Takakazu, 2015. "Delegation and Communication," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 524, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    9. Daniel Quint, 2010. "Looking smart versus playing dumb in common-value auctions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 44(3), pages 469-490, September.
    10. Vitali Gretschko & Alexander Rajko, 2015. "Excess information acquisition in auctions," Experimental Economics, Springer;Economic Science Association, vol. 18(3), pages 335-355, September.

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    More about this item

    Keywords

    Auctions Open information acquisition Asymmetric information;

    JEL classification:

    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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