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Incomplete Information, High-Low Bidding and Public Information in First Price Auctions

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  • Tom K. Lee

    (Department of Economics, University of California, San Diego, La Jolla, California 92093)

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    Abstract

    High-low bidding refers to auctions of a series of objects where for a subset of the auctioned objects one of two buyers bids high on some objects and low on others while the other buyer does the reverse. This paper shows that high-low bidding does not imply collusive behavior among buyers. In particular, through a formal modeling of a noncooperative game of information acquisition and bidding decisions, it shows that high-low bidding can be obtained. The paper also demonstrates that if the cost of information to a seller is less than the equilibrium joint expected information cost of the buyers, then it pays the seller to provide public information. Finally, if the provision of public information is not feasible but a seller can know whether buyers have acquired information, then it pays the seller to make known to the buyers and to pursue a policy that just prior to the start of an auction the seller will announce which buyer has acquired information.

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    File URL: http://dx.doi.org/10.1287/mnsc.30.12.1490
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 30 (1984)
    Issue (Month): 12 (December)
    Pages: 1490-1496

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    Handle: RePEc:inm:ormnsc:v:30:y:1984:i:12:p:1490-1496

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    Related research

    Keywords: games/group decisions bidding;

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    Cited by:
    1. Kolstad, Charles D., 1997. "A Model of Auction Equilibrium with Costly Information Acquisition," University of California at Santa Barbara, Economics Working Paper Series qt4502p3n4, Department of Economics, UC Santa Barbara.
    2. Li, Shengyu & Tian, Guoqiang, 2008. "Equilibria in Second Price Auctions with Information Acquisition," MPRA Paper 41210, University Library of Munich, Germany.
    3. 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.
    4. repec:fth:calaec:17-97 is not listed on IDEAS
    5. Guzman, Rolando M & Kolstad, Charles D., 1997. "Auction Equilibrium with Costly Information Acquisition," University of California at Santa Barbara, Economics Working Paper Series qt4w0787ng, Department of Economics, UC Santa Barbara.

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