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Ignorance Promotes Competition: an Auction Model with Endogenous Private Valuations

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  • Juan-José Ganuza
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    Abstract

    We study a situation in which an auctioneer wishes to sell an object to one of N risk-neutral bidders with heterogeneous preferences. The auctioneer does not know bidders' preferences but has private information about the characteristics of the object, and must decide how much information to reveal prior to the auction. We show that the auctioneer has incentives to release less information than would be efficient and that the amount of information released increases with the level of competition (as measured by the number of bidders). Furthermore, in a perfectly competitive market the auctioneer would provide the efficient level of information.

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    File URL: http://research.barcelonagse.eu/tmp/working_papers/107.pdf
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    Bibliographic Info

    Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 107.

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    Date of creation: Mar 2003
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    Handle: RePEc:bge:wpaper:107

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    Related research

    Keywords: Auctions; Private Values; Asymmetric information;

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    1. Nicola Persico, 1997. "Information Acquisition in Auctions," UCLA Economics Working Papers 762, UCLA Department of Economics.
    2. Tan, Guofu, 1992. "Entry and R & D in procurement contracting," Journal of Economic Theory, Elsevier, vol. 58(1), pages 41-60, October.
    3. Sobel, Joel, 1993. "Information Control in the Principal-Agent Problem," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(2), pages 259-69, May.
    4. Bergemann, Dirk & Pesendorfer, Martin, 2007. "Information structures in optimal auctions," Journal of Economic Theory, Elsevier, vol. 137(1), pages 580-609, November.
    5. Milgrom, P. & Shannon, C., 1991. "Monotone Comparative Statics," Papers 11, Stanford - Institute for Thoretical Economics.
    6. Marco Ottaviani, 2000. "The Value of Public Information in Monopoly," Econometric Society World Congress 2000 Contributed Papers 1479, Econometric Society.
    7. Aaron S. Edlin and Chris Shannon., 1995. "Strict Monotonicity in Comparative Statics," Economics Working Papers 95-238, University of California at Berkeley.
    8. Cremer, J. & Khalil, F., 1991. "Gathering Information Before Signing a Contract," Discussion Papers in Economics at the University of Washington 91-16, Department of Economics at the University of Washington.
    9. Giuseppe Moscarini & Marco Ottaviani, 1998. "Price Competition for an Informed Buyer," Cowles Foundation Discussion Papers 1199, Cowles Foundation for Research in Economics, Yale University.
    10. Dirk Bergemann & Juuso Valimaki, 1997. "Market Diffusion with Two-Sided Learning," RAND Journal of Economics, The RAND Corporation, vol. 28(4), pages 773-795, Winter.
    11. Lewis, Tracy R & Sappington, David E M, 1994. "Supplying Information to Facilitate Price Discrimination," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 309-27, May.
    12. Burkart, Mike, 1995. " Initial Shareholdings and Overbidding in Takeover Contests," Journal of Finance, American Finance Association, vol. 50(5), pages 1491-1515, December.
    13. 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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