Efficiency and information aggregation in auctions with costly information
AbstractConsider an auction in which k identical objects are sold to n > k bidders who each have a value for one object which can have both private and common components to it. Private information concerning the common component of the object is not exogenously given, but rather endogenous and bidders face a cost to becoming informed. If the cost of information is not prohibitively high, then the equilibrium price in a uniform price auction will not aggregate private information, in contrast to the costless information case. Moreover, for a wide class of auctions if the cost of information is not prohibitively high then the objects can only be allocated in a weakly efficient sense, and then only if the equilibrium proportion of endogenously informed agents is vanishing as the economy grows. In spite of these results, it is shown that there is a mechanism for which there exist equilibria and for which (weak) efficiency is achieved as the economy grows in the face of endogenous information acquisition. Copyright Springer-Verlag Berlin/Heidelberg 2003
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Bibliographic InfoArticle provided by Springer in its journal Review Economic Design.
Volume (Year): 8 (2003)
Issue (Month): 2 (October)
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Other versions of this item:
- Matthew O. Jackson, 2002. "Efficiency and Information Aggregation in Auctions with Costly Information," Microeconomics 0211012, EconWPA.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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- Jehiel, Philippe & Moldovanu, Benny, 2005.
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Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems
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