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Information Aggregation in Auctions with an Unknown Number of Bidders

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Information aggregation, a key concern for uniform-price, common-value auctions with many bidders, has been characterized in models where bidders know exactly how many rivals they face. A model allowing for uncertainty over the number of bidders is essential for capturing a critical condition for information to aggregate: as the numbers of winning and losing bidders grow large, information aggregates if and only if uncertainty about the fraction of winning bidders vanishes. It is possible for the seller to impart this information by precommitting to a specified fraction of winning bidders, via a proportional selling policy. Intuitively, this makes the proportion of winners known, and thus provides all the information that bidders need to make winners curse corrections.

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Paper provided by Department of Economics, University of Missouri in its series Working Papers with number 0605.

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Length: 38 pgs.
Date of creation: 27 Dec 2005
Date of revision:
Handle: RePEc:umc:wpaper:0605

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Keywords: information aggregation; common-value auctions; uncertain level of competition;

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  1. Harstad, Ronald M. & Kagel, John H. & Levin, Dan, 1990. "Equilibrium bid functions for auctions with an uncertain number of bidders," Economics Letters, Elsevier, vol. 33(1), pages 35-40, May.
  2. Riley, John G, 1988. "Ex Post Information in Auctions," Review of Economic Studies, Wiley Blackwell, vol. 55(3), pages 409-29, July.
  3. Milgrom, Paul R, 1981. "Rational Expectations, Information Acquisition, and Competitive Bidding," Econometrica, Econometric Society, vol. 49(4), pages 921-43, June.
  4. Milgrom, Paul R, 1979. "A Convergence Theorem for Competitive Bidding with Differential Information," Econometrica, Econometric Society, vol. 47(3), pages 679-88, May.
  5. Matthews, Steven, 1987. "Comparing Auctions for Risk Averse Buyers: A Buyer's Point of View," Econometrica, Econometric Society, vol. 55(3), pages 633-46, May.
  6. Hong, Han & Shum, Matthew, 2004. "Rates of information aggregation in common value auctions," Journal of Economic Theory, Elsevier, vol. 116(1), pages 1-40, May.
  7. Ilan Kremer, 2002. "Information Aggregation in Common Value Auctions," Econometrica, Econometric Society, vol. 70(4), pages 1675-1682, July.
  8. 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.
  9. Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Economics Series Working Papers 1999-W12, University of Oxford, Department of Economics.
  10. Wilson, Robert, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 511-18, October.
  11. 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.
  12. Rothkopf, Michael H & Harstad, Ronald M, 1995. "Two Models of Bid-Taker Cheating in Vickrey Auctions," The Journal of Business, University of Chicago Press, vol. 68(2), pages 257-67, April.
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Cited by:
  1. Bos, Olivier, 2011. "Wars of attrition and all-pay auctions with stochastic competition," MPRA Paper 34810, University Library of Munich, Germany.
  2. Ronald M. Harstad, 2007. "Does a Seller Really Want Another Bidder?," Working Papers 0711, Department of Economics, University of Missouri.

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