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Optimal auctions with information acquisition

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  • Shi, Xianwen

Abstract

This paper studies optimal auction design in a private value setting with endogenous information gathering. We develop a general framework for modeling information acquisition when a seller wants to sell an object to one of several potential buyers, who can each gather information about their valuations prior to participation in the auction. We first demonstrate that the optimal monopoly price is always lower than the standard monopoly price. We then show that standard auctions with a reserve price remain optimal among symmetric mechanisms, but the optimal reserve price lies between the ex ante mean valuation of bidders and the standard reserve price in Myerson (1981). Finally, we show that the optimal asymmetric mechanism softens the price discrimination against “strong” bidders.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 74 (2012)
Issue (Month): 2 ()
Pages: 666-686

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Handle: RePEc:eee:gamebe:v:74:y:2012:i:2:p:666-686

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Web page: http://www.elsevier.com/locate/inca/622836

Related research

Keywords: Optimal auctions; Information acquisition; Rotation order;

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References

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Citations

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Cited by:
  1. Terstiege, Stefan, 2012. "Endogenous information and stochastic contracts," Games and Economic Behavior, Elsevier, vol. 76(2), pages 535-547.
  2. Rupert Sausgruber & Christoph Schotmüller, 2013. "Monopoly Insurance with Endogenous Information," Discussion Papers 13-15, University of Copenhagen. Department of Economics.
  3. Szech, Nora, 2011. "Optimal disclosure of costly information packages in auctions," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 462-469.
  4. Pancs, Romans, 2013. "Sequential negotiations with costly information acquisition," Games and Economic Behavior, Elsevier, vol. 82(C), pages 522-543.
  5. 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.
  6. Benjamin Lester & Ludo Visschers & Ronald Wolthoff, 2013. "Competing with asking prices," Working Papers 13-07, Federal Reserve Bank of Philadelphia.
  7. Terstiege, Stefan, 2013. "Precontractual Investigation and Sequential Screening," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 429, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  8. Li, Shengyu & Tian, Guoqiang, 2008. "Equilibria in Second Price Auctions with Information Acquisition," MPRA Paper 41210, University Library of Munich, Germany.

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