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Incentive Auctions and Information Revelation

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  • Gary Biglaiser
  • Claudio Mezzetti

Abstract

We study an incentive auction in which multiple principals bid for the exclusive services, or effort, of a single agent. Each principal has private information about her valuation for these services, and the agent has private information about his disutility of providing them. We characterize the equilibrium of this auction and examine the agent's incentives to reveal information about his type. We show that the effort level taken by the agent is smaller than in the standard auction for a known agent type and greater than in the single-principal, single-agent model. Additionally, inexperienced analysts are less likely to issue timely forecasts, and they revise their forecasts more frequently. These findings are broadly consistent with existing career concern motivated herding theories.

Suggested Citation

  • Gary Biglaiser & Claudio Mezzetti, 2000. "Incentive Auctions and Information Revelation," RAND Journal of Economics, The RAND Corporation, vol. 31(1), pages 145-164, Spring.
    • Handle: RePEc:rje:randje:v:31:y:2000:i:spring:p:145-164
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    Citations

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    Cited by:

    1. Byoung Jun & Elmar Wolfstetter, 2014. "Security bid auctions for agency contracts," Review of Economic Design, Springer;Society for Economic Design, vol. 18(4), pages 289-319, December.
    2. Johannes Becker & Andrea Schneider, 2019. "Bidding for Firms with Unknown Characteristics," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(3), pages 1222-1243, July.
    3. Sengupta, Rajdeep, 2007. "Foreign entry and bank competition," Journal of Financial Economics, Elsevier, vol. 84(2), pages 502-528, May.
    4. Cremer, Helmuth & Barigozzi, Francesca, 2021. "Shining with the stars: competition, screening, and concern for coworkers' quality," CEPR Discussion Papers 16704, C.E.P.R. Discussion Papers.
    5. John Asker & Estelle Cantillon, 2008. "Properties of scoring auctions," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 69-85, March.
    6. Ahmed, Rafayal, 2018. "Dynamic Screening with Differentially Informed Principals," MPRA Paper 118463, University Library of Munich, Germany.
    7. Michela Cella & Federico Etro, 2016. "Contract competition between hierarchies, managerial compensation and imperfectly correlated shocks," Journal of Economics, Springer, vol. 118(3), pages 193-218, July.
    8. Johannes Becker, 2021. "Second-Best Source-Based Taxation of Multinational Firms," CESifo Working Paper Series 9329, CESifo.
    9. Barigozzi, Francesca & Burani, Nadia, 2019. "Competition for talent when firms' mission matters," Games and Economic Behavior, Elsevier, vol. 116(C), pages 128-151.
    10. Burani, Nadia & Mantovani, Andrea, 2020. "Non-linear pricing and conscious consumption," International Journal of Industrial Organization, Elsevier, vol. 68(C).

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