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Dominance solvability of second-price auctions with differential information

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  • EINY, Ezra
  • HAIMANKO, Ori
  • ORZACH, Ram
  • SELA, Aner
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    Abstract

    We study a class of common-value second-price auctions with differential information. This class of common-value auctions is characterized by the property that each player's information set is connected with respect to the common value. We showthat the entire class is dominance solvable, and that there is a natural single-valued selection from the resulting set of sophisticated equilibria. Additionally, it is shown that bidder's information advantage over others is rewarded in sophisticated equilibria.

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    Bibliographic Info

    Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2001007.

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    Date of creation: 00 Feb 2001
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    Handle: RePEc:cor:louvco:2001007

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    Related research

    Keywords: common-value second-price auctions; differential information; connectedness with respect to common value; dominance solvability; sophisticated equilibria; information advantage;

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    1. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
    2. Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Economics Series Working Papers 1999-W12, University of Oxford, Department of Economics.
    3. Vohra, Rajiv, 1999. "Incomplete Information, Incentive Compatibility, and the Core," Journal of Economic Theory, Elsevier, vol. 86(1), pages 123-147, May.
    4. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
    5. Paul Milgrom & Robert J. Weber, 1981. "The Value of Information in a Sealed-Bid Auction," Discussion Papers 462, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    6. Wilson, Robert, 1992. "Strategic analysis of auctions," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 8, pages 227-279 Elsevier.
    7. Wilson, Robert, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 511-18, October.
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