On information and competition in private value auctions
AbstractHow much information does an auctioneer want bidders to have in a private value environment? We address this question using a novel approach to ordering information structures based on the property that in private value settings more information leads to a more disperse distribution of buyers’ updated expected valuations. We define the class of precision criteria following this approach and different notions of dispersion, and relate them to existing criteria of informativeness. Using supermodular precision, we obtain three results: (1) a more precise information structure yields a more efficient allocation; (2) the auctioneer provides less than the efficient level of information since more information increases bidder informational rents; (3) there is a strategic complementarity between information and competition, so that both the socially efficient and the auctioneer’s optimal choice of precision increase with the number of bidders, and both converge as the number of bidders goes to infinity.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 937.
Date of creation: Jan 2006
Date of revision: Jul 2006
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Web page: http://www.econ.upf.edu/
Auctions; Competition; Private Values; Informativeness Criteria;
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-2006-02-26 (All new papers)
- NEP-COM-2006-02-26 (Industrial Competition)
- NEP-GTH-2006-02-26 (Game Theory)
- NEP-MIC-2006-02-26 (Microeconomics)
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