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Multidimensional Private Value Auctions

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  • Stephen Morris
  • Hanming Fang

Abstract

We consider parametric examples of two-bidder private value auctions in which each bidder observes her own private valuation as well as noisy signals about her opponent’s private valuation. In such multidimensional private value auction environments, we show that the revenue equivalence between the first and second price auctions breaks down and there is no definite revenue ranking; while the second price auction is always efficient allocatively, the first price auction may be inefficient and the inefficiency may increase as the signal becomes more informative; equilibria may fail to exist for the first price auction. We also illustrate that auction mechanisms provide different incentives for bidders to acquire costly information about opponents’ valuation

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Paper provided by Econometric Society in its series Econometric Society 2004 North American Winter Meetings with number 174.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:nawm04:174

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Keywords: Multidimensional Auctions; Revenue Equivalence; Allocative Efficiency; Information Acquisition;

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