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Private Information in Sequential Common-Value Auctions

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  • Johannes Horner
  • Julian Jamison

Abstract

We study an infinitely-repeated ?rst-price auction with common values. Initially, bid- ders receive independent private signals about the objects' value, which itself does not change over time. Learning occurs only through observation of the bids. Under one-sided incomplete information, this information is eventually revealed and the seller extracts es- sentially the entire rent (for large discount factors). Both players?payo¤s tend to zero as the discount factor tends to one. However, the uninformed bidder does relatively better than the informed bidder. We discuss the case of two-sided incomplete information, and argue that, under a Markovian re?nement, the outcome is pooling: information is revealed only insofar as it does not affect prices. Bidders submit a common, low bid in the tradition of collusion without conspiracy.

Suggested Citation

  • Johannes Horner & Julian Jamison, 2006. "Private Information in Sequential Common-Value Auctions," Discussion Papers 1422, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    • Handle: RePEc:nwu:cmsems:1422
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    More about this item

    Keywords

    repeated game with incomplete information; private information; ratchet effect; first-price auction; dynamic auctions;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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