Should Auctions Be Transparent?
AbstractWe investigate the role of market transparency in repeated first-price auctions. We consider a setting with private and independent values across bidders. The values are assumed to be perfectly persistent over time. We analyze the first-price auction under three distinct disclosure regimes regarding the bid and award history. Of particular interest is the minimal disclosure regime, in which each bidder only learns privately whether he won or lost the auction at the end of each round. In equilibrium, the winner of the initial auction lowers his bids over time, while losers keep their bids constant, in anticipation of the winner's lower future bids. This equilibrium is efficient, and all information is eventually revealed. Importantly, this disclosure regime does not give rise to pooling equilibria. We contrast the minimal disclosure setting with the case in which all bids are public, and the case in which only the winner's bids are public. In these settings, an inefficient pooling equilibrium with low revenues always exists with a sufficiently large number of bidders.
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Bibliographic InfoPaper provided by David K. Levine in its series Levine's Working Paper Archive with number 661465000000000128.
Date of creation: 20 Aug 2010
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Other versions of this item:
- Bergemann, Dirk & Hörner, Johannes, 2010. "Should Auctions Be Transparent?," CEPR Discussion Papers 7989, C.E.P.R. Discussion Papers.
- Dirk Bergemann & Johannes Horner, 2010. "Should Auctions be Transparent?," Cowles Foundation Discussion Papers 1764, Cowles Foundation for Research in Economics, Yale University.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
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- Michael Landsberger & Jacob Rubinstein & Elmar Wolfstetter & Shmuel Zamir, 1999.
"First-Price Auctions when the Ranking of Valuations is Common Knowledge,"
99-18, Centre de Recherche en Economie et Statistique.
- Jacob Rubinstein & Elmar Wolfstetter & Michael Landsberger & Shmuel Zamir, 2001. "First-price auctions when the ranking of valuations is common knowledge," Review of Economic Design, Springer, vol. 6(3), pages 461-480.
- M. Landsberger & J. Rubinstein & E. Wolfstetter & S. Zamir, 1996. "First-Price Auctions when the Ranking of Valuations is Common Knowledge," SFB 373 Discussion Papers 1996,36, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Estelle Cantillon & Martin Pesendorfer, 2006. "Auctioning bus routes: the London experience," ULB Institutional Repository 2013/9003, ULB -- Universite Libre de Bruxelles.
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