A Note on Revenue Effects of Asymmetry in Private-Value Auctions
AbstractWe 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 ). 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)? And does a seller enhance revenue by releasing information (asked by Milgrom and Weber)? 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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Bibliographic InfoPaper provided by The Center for the Study of Rationality, Hebrew University, Jerusalem in its series Discussion Paper Series with number dp291.
Length: 18 pages
Date of creation: Feb 2002
Date of revision:
Asymmetric Auctions; Asymmetric Beliefs; Affiliation; Linkage Principle;
Other versions of this item:
- Todd R. Kaplan & Shmuel Zamir, 2001. "A Note on Revenue Effects of Asymmetry in Private-Value Auctions," Discussion Papers 0110, Exeter University, Department of Economics.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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- Cantillon, Estelle, 2008.
"The effect of bidders' asymmetries on expected revenue in auctions,"
Games and Economic Behavior,
Elsevier, vol. 62(1), pages 1-25, January.
- Estelle Cantillon, 2000. "The Effect of Bidders' Asymmetries on Expected Revenue in Auctions," Cowles Foundation Discussion Papers 1279, Cowles Foundation for Research in Economics, Yale University.
- Estelle Cantillon, 2008. "The effect of bidders' asymmetries on expected revenue in auctions," ULB Institutional Repository 2013/9001, ULB -- Universite Libre de Bruxelles.
- Maskin, Eric & Riley, John, 2000. "Asymmetric Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 413-38, July.
- Cheng, Harrison, 2011. "Asymmetry and revenue in first-price auctions," Economics Letters, Elsevier, vol. 111(1), pages 78-80, April.
- Kaplan, Todd & Sela, Aner, 2003. "Auctions with Private Entry Costs," CEPR Discussion Papers 4080, C.E.P.R. Discussion Papers.
- Lamping, Jennifer, 2008. "Ignorance Is Bliss: Matching in Auctions with an Uninformed Seller," MPRA Paper 24374, University Library of Munich, Germany.
- Cheng, Harrison, 2006. "Ranking sealed high-bid and open asymmetric auctions," Journal of Mathematical Economics, Elsevier, vol. 42(4-5), pages 471-498, August.
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