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A common-value auction with state-dependent participation

Author

Listed:
  • Lauermann, Stephan

    (Department of Economics, University of Bonn)

  • Wolinsky, Asher

    (Department of Economics, Northwestern University)

Abstract

This paper analyzes a common-value, first-price auction with state-dependent participation. The number of bidders, which is unobservable to them, depends on the true value. For participation patterns with many bidders in each state, the bidding equilibrium may be of a "pooling" type---with high probability, the winning bid is the same across states and is below the ex-ante expected value---or of a "partially revealing" type---with no significant atoms in the winning bid distribution and an expected winning bid increasing in the true value. Which of these forms will arise is determined by the likelihood ratio at the top of the signal distribution and the participation across states. We fully characterize this relation and show how the participation pattern determines the extent of information aggregation by the price.

Suggested Citation

  • Lauermann, Stephan & Wolinsky, Asher, 2022. "A common-value auction with state-dependent participation," Theoretical Economics, Econometric Society, vol. 17(2), May.
    • Handle: RePEc:the:publsh:3733
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    File URL: http://econtheory.org/ojs/index.php/te/article/viewFile/20220841/33816/990
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    Cited by:

    1. Stephan Lauermann & Asher Wolinsky, 2024. "Auctions with Frictions: Recruitment, Entry, and Limited Commitment," ECONtribute Discussion Papers Series 288, University of Bonn and University of Cologne, Germany.
    2. Stephan Lauermann & Asher Wolinsky, 2024. "Auctions with Frictions: Recruitment, Entry, and Limited Commitment," CRC TR 224 Discussion Paper Series crctr224_2024_519, University of Bonn and University of Mannheim, Germany.

    More about this item

    Keywords

    Auction theory; bargaining; competition;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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