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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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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. Dirk Bergemann & Xianwen Shi & Juuso Valimaki, 2007. "Information Acquisition in Interdependent Value Auctions," Cowles Foundation Discussion Papers 1619, Cowles Foundation for Research in Economics, Yale University.
  2. Obara Ichiro, 2008. "The Full Surplus Extraction Theorem with Hidden Actions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 8(1), pages 1-28, March.
  3. Wolfgang Pesendorfer & Jeroen M. Swinkels, 1996. "Efficiency and Information Aggregation in Auctions," Discussion Papers 1168, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. 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.
  5. Barlevy, Gadi & Veronesi, Pietro, 2000. "Information Acquisition in Financial Markets," Review of Economic Studies, Wiley Blackwell, vol. 67(1), pages 79-90, January.
  6. Philippe Jehiel & Benny Moldovanu, 1998. "Efficient Design with Interdependent Valuations," Discussion Papers 1244, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Dirk Bergemann & Juuso Vaimaki, 2000. "Information Acquisition and Efficient Mechanism Design," Cowles Foundation Discussion Papers 1248, Cowles Foundation for Research in Economics, Yale University.
  8. Nicola Persico, 1997. "Information Acquisition in Auctions," UCLA Economics Working Papers 762, UCLA Department of Economics.
  9. Matthew O. Jackson, 2002. "Efficiency and Information Aggregation in Auctions with Costly Information," Microeconomics 0211012, EconWPA.
  10. 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.
  11. P. Dasgupta & Eric Maskin, 1998. "Efficient Auctions," Harvard Institute of Economic Research Working Papers 1857, Harvard - Institute of Economic Research.
  12. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June.
  13. repec:wop:humbsf:2000-72 is not listed on IDEAS
  14. Chamley, Christophe, 2007. "Complementarities in information acquisition with short-term trades," Theoretical Economics, Econometric Society, vol. 2(4), December.
  15. Stegeman, Mark, 1996. "Participation Costs and Efficient Auctions," Journal of Economic Theory, Elsevier, vol. 71(1), pages 228-259, October.
  16. Crémer, Jacques & Spiegel, Yossi & Zheng, Charles, 2003. "Optimal Selling Mechanisms wth Costly Information Acquisition," IDEI Working Papers 205, Institut d'Économie Industrielle (IDEI), Toulouse.
  17. 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.
  18. Milgrom, Paul R, 1981. "Rational Expectations, Information Acquisition, and Competitive Bidding," Econometrica, Econometric Society, vol. 49(4), pages 921-43, June.
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Cited by:
  1. Dirk Bergemann & Xianwen Shi & Juuso Valimaki, 2007. "Information Acquisition in Interdependent Value Auctions," Cowles Foundation Discussion Papers 1619, Cowles Foundation for Research in Economics, Yale University.
  2. Braz Camargo & Kyungmin (Teddy) Kim & Benjamin Lester, 2013. "Subsidizing price discovery," Working Papers 13-20, Federal Reserve Bank of Philadelphia.
  3. Szech, Nora, 2011. "Optimal disclosure of costly information packages in auctions," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 462-469.

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