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Equilibria in Second Price Auctions with Information Acquisition

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  • Li, Shengyu
  • Tian, Guoqiang

Abstract

This paper studies equilibria in second price auctions with information acquisition in an independent private value setting. We focus on the existence and uniqueness of equilibrium in the information acquisition stage for both homogenous and heterogenous bidders. It is shown that, when the relative probability gain of information acquisition is increasing, there always exists an equilibrium and further it is symmetric and unique when bidders are homogenous. Moreover, we show that different type of bidders must choose different information levels, and further the advantaged groups with lower marginal information cost have stronger incentive to acquire information. An illustrative example with two bidders and Gaussian specification is presented to provide intuition and implications on equilibrium behavior of bidders.

Suggested Citation

  • Li, Shengyu & Tian, Guoqiang, 2008. "Equilibria in Second Price Auctions with Information Acquisition," MPRA Paper 41210, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:41210
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    References listed on IDEAS

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    More about this item

    Keywords

    Second price auctions; information acquisition; heterogenous bidders; the existence and uniqueness of equilibrium;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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