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 Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1764.
Length: 70 pages
Date of creation: Aug 2010
Date of revision:
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
Other versions of this item:
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-08-21 (All new papers)
- NEP-CTA-2010-08-21 (Contract Theory & Applications)
- NEP-MIC-2010-08-21 (Microeconomics)
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.:
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"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.
- 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.
- Michael Landsberger & Jacob Rubinstein & Elmar Wolfstetter & Shmuel Zamir, 1999. "First-Price Auctions when the Ranking of Valuations is Common Knowledge," Working Papers 99-18, Centre de Recherche en Economie et Statistique.
- 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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