The Insider'S Curse

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The Insider'S Curse

Author Info

Ángel Hernando Veciana () (Universidad de Alicante)
Michael Tröge (ESCP-EAP, París)

Additional information is available for the following registered author(s):

Angel Hernando-Veciana

Abstract

This paper studies an auction model in which one of the bidders, the insider, has better information about a common component of the value of the good for sale, than the other bidders, the outsiders. Our main result shows that the insider may have incentives to disclose her private information if she faces sufficiently strong competition from the outsiders. We also show that the insider can protect the value of her private information by hiding her presence in the auction to the outsiders. Finally, we analyze the implications of information revelation on the efficiency of the auction and on the auctioneer's expected revenue.

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Publisher Info
Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2005-08.

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Length: 49 pages
Date of creation: Mar 2005
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2005-08

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Paper
- Angel Hernando-Veciana & Michael Tröge, 2005. "The Insider's Curse," Microeconomics 0503012, EconWPA. [Downloadable!]

Find related papers by JEL classification:
D41 - Microeconomics - - Market Structure and Pricing - - - Perfect Competition
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

This paper has been announced in the following NEP Reports:

NEP-ALL-2006-02-05 (All new papers)

References listed on IDEAS
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.:

Campbell, Colin M. & Levin, Dan, 2000. "Can the Seller Benefit from an Insider in Common-Value Auctions?," Journal of Economic Theory, Elsevier, vol. 91(1), pages 106-120, March. [Downloadable!] (restricted)
Ángel Hernando Veciana, 2006. "Information Acquisition In Auctions: Sealed Bids Vs. Open Bids," Working Papers. Serie AD 2006-10, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
Other versions:
- Hernando-Veciana, Ángel, 2009. "Information acquisition in auctions: Sealed bids vs. open bids," Games and Economic Behavior, Elsevier, vol. 65(2), pages 372-405, March. [Downloadable!] (restricted)
Bagnoli, M. & Bergstrom, T., 1989. "Log-Concave Probability And Its Applications," Papers 89-23, Michigan - Center for Research on Economic & Social Theory.
Other versions:
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Other versions:
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Other versions:
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Jeremy Bulow & Ming Huang & Paul Klemperer, 1999. "Toeholds and Takeovers," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 427-454, June. [Downloadable!] (restricted)
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Marco Ottaviani & Andrea Prat, 2001. "The Value of Public Information in Monopoly," Econometrica, Econometric Society, vol. 69(6), pages 1673-1683, November. [Downloadable!] (restricted)
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Juan-José Ganuza, 2004. "Ignorance Promotes Competition: An Auction Model of Endogenous Private Valuations," RAND Journal of Economics, The RAND Corporation, vol. 35(3), pages 583-598, Autumn.
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Other versions:
- Benoit, Jean-Pierre & Dubra, Juan, 2006. "Information revelation in auctions," Games and Economic Behavior, Elsevier, vol. 57(2), pages 181-205, November. [Downloadable!] (restricted)
Athey, Susan, 2001. "Single Crossing Properties and the Existence of Pure Strategy Equilibria in Games of Incomplete Information," Econometrica, Econometric Society, vol. 69(4), pages 861-89, July.
Other versions:
- Athey, S., 1997. "Sigle Crossing Properties and the Existence of Pure Strategy Equilibria in Games of Incomplete Information," Working papers 97-11, Massachusetts Institute of Technology (MIT), Department of Economics.
Wolfgang Pesendorfer & Jeroen M. Swinkels, 1997. "The Loser's Curse and Information Aggregation in Common Value Auctions," Econometrica, Econometric Society, vol. 65(6), pages 1247-1282, November.
Other versions:
- Wolfgang Pesendorfer & Jeroen M. Swinkels, 1995. "The Loser's Curse and Information Aggregation in Common Value Auctions," Discussion Papers 1147, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September. [Downloadable!] (restricted)
Other versions:
- Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
Milgrom, Paul R, 1979. "A Convergence Theorem for Competitive Bidding with Differential Information," Econometrica, Econometric Society, vol. 47(3), pages 679-88, May. [Downloadable!] (restricted)

Full references

Cited by:
(explanations, 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.)

Boone, Jan & Goeree, Jacob K., 2005. "Optimal Privatization Using Qualifying Auctions," CEPR Discussion Papers 5118, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Other versions:
- Boone, J. & Goeree, J.K., 2005. "Optimal privatization using qualifying auctions," Discussion Paper 21, Tilburg University, Tilburg Law and Economic Center. [Downloadable!]
- Boone, J. & Goeree, Jacob K., 2005. "Optimal privatization using qualifying auctions," Discussion Paper 72, Tilburg University, Center for Economic Research. [Downloadable!]
- Jan Boone & JacobK. Goeree, 2009. "Optimal Privatisation Using Qualifying Auctions," Economic Journal, Royal Economic Society, vol. 119(534), pages 277-297, 01. [Downloadable!] (restricted)
Ángel Hernando Veciana, 2006. "Information Acquisition In Auctions: Sealed Bids Vs. Open Bids," Working Papers. Serie AD 2006-10, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
Other versions:
- Hernando-Veciana, Ángel, 2009. "Information acquisition in auctions: Sealed bids vs. open bids," Games and Economic Behavior, Elsevier, vol. 65(2), pages 372-405, March. [Downloadable!] (restricted)

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