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Information structures in optimal auctions

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  • Bergemann, Dirk
  • Pesendorfer, Martin

Abstract

A seller wishes to sell an object to one of multiple bidders. The valuations of the bidders are privately known. We consider the joint design problem in which the seller can decide the accuracy by which bidders learn their valuation and to whom to sell at what price. We establish that optimal information structures in an optimal auction exhibit a number of properties: (i) information structures can be represented by monotone partitions, (ii) the cardinality of each partition is finite, (iii) the partitions are asymmetric across agents. These properties imply that the optimal selling strategy of a seller can be implemented by a sequence of exclusive take-it or leave-it offers.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 137 (2007)
Issue (Month): 1 (November)
Pages: 580-609

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Handle: RePEc:eee:jetheo:v:137:y:2007:i:1:p:580-609

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Web page: http://www.elsevier.com/locate/inca/622869

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  1. Cremer, J. & Khalil, F & Rochet, J.-C., 1996. "Strategic Information Gathering Before a Contract is Offered," Papers 976.425, Toulouse - GREMAQ.
  2. Cremer, J. & Khalil, F. & Rochet, J-C., 1997. "Contracts and productive information gathering," Discussion Paper Series In Economics And Econometrics 9707, Economics Division, School of Social Sciences, University of Southampton.
  3. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Crémer, Jacques & Khalil, Fahad, 1991. "Gathering Information before Signing a Contract," IDEI Working Papers 5, Institut d'Économie Industrielle (IDEI), Toulouse.
  5. Nicola Persico, 2000. "Information Acquisition in Auctions," Econometrica, Econometric Society, vol. 68(1), pages 135-148, January.
  6. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
  7. Lewis Tracy R. & Sappington David E. M., 1993. "Ignorance in Agency Problems," Journal of Economic Theory, Elsevier, vol. 61(1), pages 169-183, October.
  8. Stegeman, Mark, 1996. "Participation Costs and Efficient Auctions," Journal of Economic Theory, Elsevier, vol. 71(1), pages 228-259, October.
  9. Motty Perry & Philip J. Reny, 1999. "On The Failure of the Linkage Principle in Multi-Unit Auctions," Econometrica, Econometric Society, vol. 67(4), pages 895-900, July.
  10. Sobel, Joel, 1993. "Information Control in the Principal-Agent Problem," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(2), pages 259-69, May.
  11. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  12. Dirk Bergemann & Juuso Valimaki, 2002. "Information Acquisition and Efficient Mechanism Design," Econometrica, Econometric Society, vol. 70(3), pages 1007-1033, May.
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