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A Note on Revenue Effects of Asymmetry in Private-Value Auctions

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  • Todd R. Kaplan

    (Department of Economics, University of Exeter)

  • Shmuel Zamir

    (CNRS-EUREQua at Universite Paris1, LEI/CREST, France and the Hebrew University, Israel.)

Abstract

We formulate a way to study whether the asymmetry of buyers (in the sense of having different prior probability distributions of valuations) is helpful to the seller in private-value auctions (asked first by Cantillon [2001]). In our proposed formulation, this question corresponds to two important questions previously asked: Does a first-price auction have higher revenue than a second-price auction when buyers have asymmetric distributions (asked by Maskin and Riley[2000])? And does a seller enhance revenue by releasing information (asked by Milgrom and Weber[1982])? This is shown by constructing two Harsanyi games of incomplete information each having the same ex-ante distribution of valuations but in one beliefs are symmetric while in the other beliefs are sometimes asymmetric. Our main result is that answers to all three questions coincide when values are independent and are related when values are affiliated.

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File URL: http://people.exeter.ac.uk/cc371/RePEc/dpapers/DP0110.pdf
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Bibliographic Info

Paper provided by Exeter University, Department of Economics in its series Discussion Papers with number 0110.

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Date of creation: 2001
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Handle: RePEc:exe:wpaper:0110

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Related research

Keywords: Asymmetric Auctions; Asymmetric Beliefs; Affiliation; Linkage Principle;

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References

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  1. Estelle Cantillon, 2008. "The effect of bidders' asymmetries on expected revenue in auctions," ULB Institutional Repository 2013/9001, ULB -- Universite Libre de Bruxelles.
  2. Maskin, Eric & Riley, John, 2000. "Asymmetric Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 413-38, July.
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Cited by:
  1. Lamping, Jennifer, 2008. "Ignorance Is Bliss: Matching in Auctions with an Uninformed Seller," MPRA Paper 24374, University Library of Munich, Germany.
  2. Cheng, Harrison, 2011. "Asymmetry and revenue in first-price auctions," Economics Letters, Elsevier, vol. 111(1), pages 78-80, April.
  3. Cheng, Harrison, 2006. "Ranking sealed high-bid and open asymmetric auctions," Journal of Mathematical Economics, Elsevier, vol. 42(4-5), pages 471-498, August.
  4. Kaplan, Todd & Sela, Aner, 2003. "Auctions with Private Entry Costs," CEPR Discussion Papers 4080, C.E.P.R. Discussion Papers.

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