Ignorance promotes competition: An auction model with endogenous private valuations
AbstractWe 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 InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 671.
Date of creation: Mar 2003
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Web page: http://www.econ.upf.edu/
Auctions; private values; asymmetric information;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-05-26 (All new papers)
- NEP-COM-2004-05-16 (Industrial Competition)
- NEP-MIC-2004-05-26 (Microeconomics)
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