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Ignorance promotes competition: An auction model with endogenous private valuations

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Abstract

We study a situation in which an auctioneer wishes to sell an object to one of N risk-neutral bidders with heterogeneous preferences. The auctioneer does not know bidders’ preferences but has private information about the characteristics of the ob ject, and must decide how much information to reveal prior to the auction. We show that the auctioneer has incentives to release less information than would be efficient and that the amount of information released increases with the level of competition (as measured by the number of bidders). Furthermore, in a perfectly competitive market the auctioneer would provide the efficient level of information.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 671.

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Date of creation: Mar 2003
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Handle: RePEc:upf:upfgen:671

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Web page: http://www.econ.upf.edu/

Related research

Keywords: Auctions; private values; asymmetric information;

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References

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  1. Dirk Bergemann & Juuso Valimaki, 1996. "Market Diffusion with Two-Sided Learning," Cowles Foundation Discussion Papers 1138, Cowles Foundation for Research in Economics, Yale University.
  2. Motty Perry & Philip J. Reny, 1999. "On The Failure of the Linkage Principle in Multi-Unit Auctions," Econometrica, Econometric Society, Econometric Society, vol. 67(4), pages 895-900, July.
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Cited by:
  1. Olivier Compte & Andrew Postlewaite, 2010. "Simple Auctions, Second Version," PIER Working Paper Archive 13-017, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Apr 2013.
  2. Vasiliki Skreta, 2007. "On the Informed Seller Problem: Optimal Information Disclosure," Levine's Bibliography 122247000000001789, UCLA Department of Economics.
  3. Li, Shengyu & Tian, Guoqiang, 2008. "Equilibria in Second Price Auctions with Information Acquisition," MPRA Paper 41210, University Library of Munich, Germany.
  4. Joaquin Coleff & Daniel Garcia, 2013. "Information Provision in Procurement Auctions," BORRADORES DE INVESTIGACIÓN 011006, UNIVERSIDAD DEL ROSARIO.
  5. Simon Board, 2009. "Revealing information in auctions: the allocation effect," Economic Theory, Springer, Springer, vol. 38(1), pages 125-135, January.
  6. Tian, Guoqiang & Xiao, Mingjun, 2007. "Endogenous Information Acquisition on Opponents' Valuations in Multidimensional First Price Auctions," MPRA Paper 41214, University Library of Munich, Germany, revised Jan 2010.
  7. Dewatripont, Mathias & Legros, Patrick, 2005. "Public-private partnerships: contract design and risk transfer," EIB Papers 5/2005, European Investment Bank, Economics Department.

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