Signaling in First-Price Auctions
AbstractIt 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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Bibliographic InfoPaper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse18_2010.
Date of creation: Sep 2010
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asymmetric auction; first-price auction; signaling;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-23 (All new papers)
- NEP-CTA-2010-10-23 (Contract Theory & Applications)
- NEP-MIC-2010-10-23 (Microeconomics)
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- Lucie Ménager, 2013. "Communication in procurement: silence is not golden," Working Papers hal-00856078, HAL.
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