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Signaling in First-Price Auctions

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  • Thomas Rieck

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Abstract

It is commonly assumed in private value auctions that bidders have no information about the realization of the other bidders' valuations. Nevertheless, an informative public signal about the realization may be released by a bidder while he learns his own valuation. Using a simple discrete asymmetric first-price auction setting, we show that a bidder may indeed benefit from the presence of an informative signal about his own valuation. We characterize the optimal signal and show that a signal is not beneficial if it is too precise. The latter result carries over to a general continuous asymmetric first-price auction model. Finally, we use a specific signaling structure with uniform distributions to show that signaling need not be beneficial for any precision of the signal.

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File URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse18_2010.pdf
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Bibliographic Info

Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse18_2010.

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Length: 28
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:bon:bonedp:bgse18_2010

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Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de

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Keywords: asymmetric auction; first-price auction; signaling;

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Cited by:
  1. Lucie Ménager, 2013. "Communication in procurement: silence is not golden," Working Papers hal-00856078, HAL.

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