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The value of an informed bidder in common value auctions

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  • Kim, Jinwoo
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    Abstract

    I compare two information structures in a common value first-price auction with two bidders: In one, each of the two bidders knows only his own signal about the value of the object, and in the other, one of the bidders learns his opponent's signal as well. Gaining the additional information in the second information structure makes the informed bidder worse off if the value is submodular in the bidders' signals and better off if it is supermodular. If the value is supermodular, then the seller's revenue tends to be lower with the informed bidder than without.

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    File URL: http://www.sciencedirect.com/science/article/B6WJ3-4SHVT28-1/2/6c0cb96b9d9c48fae314978e6a547813
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    Bibliographic Info

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

    Volume (Year): 143 (2008)
    Issue (Month): 1 (November)
    Pages: 585-595

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    Handle: RePEc:eee:jetheo:v:143:y:2008:i:1:p:585-595

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

    Related research

    Keywords: Common value First-price auction Informed bidder;

    References

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    1. Paul Milgrom & Robert J. Weber, 1981. "The Value of Information in a Sealed-Bid Auction," Discussion Papers 462, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Feinberg Yossi & Tennenholtz Moshe, 2005. "Anonymous Bidding and Revenue Maximization," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 5(1), pages 1-12, October.
    3. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
    4. Kim, Jinwoo & Che, Yeon-Koo, 2004. "Asymmetric information about rivals' types in standard auctions," Games and Economic Behavior, Elsevier, vol. 46(2), pages 383-397, February.
    5. Hanming Fang, 2004. "Multidimensional Private Value Auctions," Theory workshop papers 121473000000000021, UCLA Department of Economics.
    6. Campbell, Colin M. & Levin, Dan, 2000. "Can the Seller Benefit from an Insider in Common-Value Auctions?," Journal of Economic Theory, Elsevier, vol. 91(1), pages 106-120, March.
    7. Fang, Hanming & Parreiras, Sergio O., 2003. "On the failure of the linkage principle with financially constrained bidders," Journal of Economic Theory, Elsevier, vol. 110(2), pages 374-392, June.
    8. 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.
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    Cited by:
    1. Florian Morath & Johannes M√ľnster, 2013. "Information acquisition in conflicts," Economic Theory, Springer, vol. 54(1), pages 99-129, September.
    2. Celik, Gorkem & Peters, Michael, 2011. "Equilibrium rejection of a mechanism," Games and Economic Behavior, Elsevier, vol. 73(2), pages 375-387.
    3. Erik R. Fasten & Dirk Hofmann, 2010. "Two-sided Certification: The market for Rating Agencies," SFB 649 Discussion Papers SFB649DP2010-007, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.

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