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Endogenous Information Acquisition on Opponents' Valuations in Multidimensional First Price Auctions

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  • Tian, Guoqiang
  • Xiao, Mingjun

Abstract

This paper investigates bidder's covert behavior of endogenous information acquisition on her opponents' valuations in first price auction model with independent private values. Such an information acquisition setting leads to bidimensional type space and bidimensional strategy space. We consider two different specifications of the environments: the ex ante information acquisition setting and the interim information acquisition setting. In equilibria the expected payoffs of the bidder under these specifications could exceed the counterpart payoffs of the corresponding standard sealed-bid auctions without information acquisition as long as the cost is small, but the auctioneer has lower payoffs in these models than those of the standard ones. Moreover, the incurred information cost becomes the deadweight loss, resulting in ine±cient outcomes.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 41214.

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Date of creation: Sep 2007
Date of revision: Jan 2010
Handle: RePEc:pra:mprapa:41214

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Related research

Keywords: First-price sealed-bid auctions; endogenous information acquisition; opponents' valuation; profitability;

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References

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  1. Maskin, Eric S & Riley, John G, 1984. "Optimal Auctions with Risk Averse Buyers," Econometrica, Econometric Society, vol. 52(6), pages 1473-1518, November.
  2. Fang, Hanming & Morris, Stephen, 2006. "Multidimensional private value auctions," Journal of Economic Theory, Elsevier, vol. 126(1), pages 1-30, January.
  3. Xianwen Shi, 2007. "Optimal Auctions with Information Acquisition," Working Papers tecipa-302, University of Toronto, Department of Economics.
  4. Kenneth Mount & Stanley Reiter, 1973. "The Informational Size of Message Spaces," Discussion Papers 3, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Leandro Arozamena & Estelle Cantillon, 2004. "Investment Incentives in Procurement Auctions," Review of Economic Studies, Wiley Blackwell, vol. 71(1), pages 1-18, 01.
  6. Guzman, Rolando M & Kolstad, Charles D., 1997. "Auction Equilibrium with Costly Information Acquisition," University of California at Santa Barbara, Economics Working Paper Series qt4w0787ng, Department of Economics, UC Santa Barbara.
  7. Kolstad, Charles D., 1997. "A Model of Auction Equilibrium with Costly Information Acquisition," University of California at Santa Barbara, Economics Working Paper Series qt4502p3n4, Department of Economics, UC Santa Barbara.
  8. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Papers 2004-W09, Economics Group, Nuffield College, University of Oxford.
  9. Milgrom, Paul R, 1981. "Rational Expectations, Information Acquisition, and Competitive Bidding," Econometrica, Econometric Society, vol. 49(4), pages 921-43, June.
  10. Paul Klemperer, 2004. "Introduction to Auctions: Theory and Practice
    [Auctions: Theory and Practice]
    ," Introductory Chapters, Princeton University Press.
  11. 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.
  12. Maskin, Eric & Riley, John, 2000. "Equilibrium in Sealed High Bid Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 439-54, July.
  13. Juan José Ganuza, 2003. "Ignorance promotes competition: An auction model with endogenous private valuations," Economics Working Papers 671, Department of Economics and Business, Universitat Pompeu Fabra.
  14. Tom K. Lee, 1984. "Incomplete Information, High-Low Bidding and Public Information in First Price Auctions," Management Science, INFORMS, vol. 30(12), pages 1490-1496, December.
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