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Information Acquisition in Interdependent Value Auctions

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  • Dirk Bergemann
  • Juuso Välimäki
  • Xianwen Shi

Abstract

We consider an auction environment with interdependent values. Each bidder can learn her payoff type through costly information acquisition. We contrast the socially optimal decision to acquire information with the equilibrium solution in which each agent has to privately bear the cost of information acquisition. In the context of the generalized Vickrey-Clarke-Groves mechanism, we establish that the equilibrium level exceeds the socially optimal level of information with positive interdependence. The individual decisions to acquire information are strategic substitutes. The difference between the equilibrium and the efficient level of information acquisition is increasing in the interdependence of the bidders' valuations and decreasing in the number of informed bidders.

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Bibliographic Info

Paper provided by UCLA Department of Economics in its series Levine's Bibliography with number 843644000000000320.

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Date of creation: 31 Jul 2007
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Handle: RePEc:cla:levrem:843644000000000320

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  1. Ichiro Obara, 2006. "The Full Surplus Extraction Theorem with Hidden Actions," Levine's Bibliography 122247000000001206, UCLA Department of Economics.
  2. French, Kenneth R & McCormick, Robert E, 1984. "Sealed Bids, Sunk Costs, and the Process of Competition," The Journal of Business, University of Chicago Press, vol. 57(4), pages 417-41, October.
  3. Dirk Bergemann & Juuso Välimäki & Xianwen Shi, 2007. "Information Acquisition in Interdependent Value Auctions," Levine's Bibliography 843644000000000320, UCLA Department of Economics.
  4. Chamley, Christophe, 2007. "Complementarities in information acquisition with short-term trades," Theoretical Economics, Econometric Society, vol. 2(4), December.
  5. Philippe Jehiel & Benny Moldovanu, 1998. "Efficient Design with Interdependent Valuations," Discussion Papers 1244, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Jeroen M. Swinkels & Wolfgang Pesendorfer, 2000. "Efficiency and Information Aggregation in Auctions," American Economic Review, American Economic Association, vol. 90(3), pages 499-525, June.
  7. Matthew Jackson, 2003. "Efficiency and information aggregation in auctions with costly information," Review of Economic Design, Springer, vol. 8(2), pages 121-141, October.
  8. Cremer, Jacques & McLean, Richard P, 1985. "Optimal Selling Strategies under Uncertainty for a Discriminating Monopolist When Demands Are Interdependent," Econometrica, Econometric Society, vol. 53(2), pages 345-61, March.
  9. Gadi Barlevy & Pietro Veronesi, . "Information Acquisition in Financial Markets," CRSP working papers 484, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  10. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June.
  11. Wolfgang Pesendorfer & Jeroen M. Swinkels, 1997. "The Loser's Curse and Information Aggregation in Common Value Auctions," Econometrica, Econometric Society, vol. 65(6), pages 1247-1282, November.
  12. Nicola Persico, 2000. "Information Acquisition in Auctions," Econometrica, Econometric Society, vol. 68(1), pages 135-148, January.
  13. repec:wop:humbsf:2000-72 is not listed on IDEAS
  14. Partha Dasgupta & Eric Maskin, 2000. "Efficient Auctions," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 341-388, May.
  15. Dirk Bergemann & Juuso Valimaki, 2002. "Information Acquisition and Efficient Mechanism Design," Econometrica, Econometric Society, vol. 70(3), pages 1007-1033, May.
  16. Stegeman, Mark, 1996. "Participation Costs and Efficient Auctions," Journal of Economic Theory, Elsevier, vol. 71(1), pages 228-259, October.
  17. Crémer, Jacques & Spiegel, Yossi & Zheng, Charles, 2003. "Optimal Selling Mechanisms wth Costly Information Acquisition," IDEI Working Papers 205, Institut d'Économie Industrielle (IDEI), Toulouse.
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Cited by:
  1. Szech, Nora, 2011. "Optimal disclosure of costly information packages in auctions," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 462-469.
  2. Dirk Bergemann & Xianwen Shi & Juuso Valimaki, 2008. "Information Acquisition in Interdependent Value Auctions," Working Papers tecipa-307, University of Toronto, Department of Economics.

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