Seller Cheap Talk in Common Value Auctions

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Seller Cheap Talk in Common Value Auctions

Author Info

Archishman Chakraborty (Baruch College CUNY)
Nandini Gupta (William Davidson Institute, University of Michigan)
Rick Harbaugh (Claremont McKenna College)

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Abstract

Sellers benefit on average from revealing information about their goods to buyers, but the incentive to exaggerate undermines the credibility of seller statements. When multiple goods are being auctioned, we show that ordinal cheap talk, which reveals a complete or partial ordering of the different goods by value, can be credible. Ordinal statements are not susceptible to exaggeration because they simultaneously reveal favorable information about some goods and unfavorable information about other goods. Any informative ordering increases revenues in accordance with the linkage principle, and the complete ordering is asymptotically revenue-equivalent to full revelation as the number of goods becomes large. These results provide a new explanation in addition to bundling, versioning, and complementarities for how a seller benefits from the sale of multiple goods.

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Paper provided by Claremont Colleges in its series Claremont Colleges Working Papers with number 2002-30.

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Date of creation: Dec 2002
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Handle: RePEc:clm:clmeco:2002-30

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Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

This paper has been announced in the following NEP Reports:

NEP-ALL-2002-12-17 (All new papers)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Barry Nalebuff, 2000. "Competing Against Bundles," Yale School of Management Working Papers ysm157, Yale School of Management. [Downloadable!]
S.J. Rassenti & V.L. Smith & R.L. Bulfin, 1982. "A Combinatorial Auction Mechanism for Airport Time Slot Allocation," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 402-417, Autumn. [Downloadable!] (restricted)
Farrell, Joseph & Gibbons, Robert, 1989. "Cheap talk can matter in bargaining," Journal of Economic Theory, Elsevier, vol. 48(1), pages 221-237, June. [Downloadable!] (restricted)
Other versions:
- Joseph Farrell and Robert Gibbons., 1988. "Cheap Talk Can Matter in Bargaining," Economics Working Papers 8863, University of California at Berkeley.
- Robert Gibbons & Joseph Farrell, 1988. "Cheap Talk Can Matter in Bargaining," Working papers 482, Massachusetts Institute of Technology (MIT), Department of Economics.
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Other versions:
- 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. [Downloadable!]
Varian, Hal R., 1989. "Price discrimination," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 10, pages 597-654 Elsevier. [Downloadable!] (restricted)
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Other versions:
- Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]

Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Archishman Chakraborty & Nandini Gupta & Rick Harbaugh, 2004. "Best Foot Forward or Best for Last in a Sequential Auction?," Working Papers 2004-07, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
Other versions:
- Archishman Chakraborty & Nandini Gupta & Rick Harbaugh, 2000. "Best Foot Forward or Best for Last in a Sequential Auction?," Claremont Colleges Working Papers 2000-43, Claremont Colleges. [Downloadable!]
- Archishman Chakraborty & Nandini Gupta & Rick Harbaugh, 2006. "Best Foot Forward or Best for Last in a Sequential Auction?," RAND Journal of Economics, The RAND Corporation, vol. 37(1), pages 176-194, Spring.
Jackson, Matthew O. & Sonnenschein, Hugo F., 2003. "The Linking of Collective Decisions and Efficiency," Working Papers 1159, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
Other versions:
- Matthew O. Jackson & Hugo F. Sonnenschein, 2003. "The Linking of Collective Decisions and Efficiency," Microeconomics 0303007, EconWPA. [Downloadable!]
- Matthew O Jackson & Hugo F Sonnenschein, 2003. "The Linking of Collective Decisions and Efficiency," NajEcon Working Paper Reviews 666156000000000057, www.najecon.org. [Downloadable!]
Archishman Chakraborty & Rick Harbaugh, 2004. "Comparative Cheap Talk," Working Papers 2004-08, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
Other versions:
- Chakraborty, Archishman & Harbaugh, Rick, 2007. "Comparative cheap talk," Journal of Economic Theory, Elsevier, vol. 132(1), pages 70-94, January. [Downloadable!] (restricted)

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