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Information acquisition during a descending price auction with asymmetrically informed players

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  • Miettinen, Paavo

Abstract

This paper considers equilibrium behavior in a descending price auction with two players that are asymmetrically informed. The "informed" player knows his valuation while the other does not. The uninformed player can acquire information about his valuation with a positive cost during the auction. We assume that the information acquisition activity is covert and we characterize the equilibrium behavior in the setting where players' valuations are independently and identically distributed. We derive the explicit "inverse bid" functions in the case of the uniformly distributed valuations and provide a revenue comparison between the ascending and descending price auctions in this case.

Suggested Citation

  • Miettinen, Paavo, 2017. "Information acquisition during a descending price auction with asymmetrically informed players," Bank of Finland Research Discussion Papers 5/2017, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:rdp2017_005
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    References listed on IDEAS

    as
    1. Miettinen, Paavo, 2012. "Information acquisition during a Dutch auction," Bank of Finland Research Discussion Papers 8/2012, Bank of Finland.
    2. Olivier Compte & Philippe Jehiel, 2007. "Auctions and information acquisition: sealed bid or dynamic formats?," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 355-372, June.
    3. Dirk Bergemann & Juuso Valimaki, 2005. "Information in Mechanism Design," Cowles Foundation Discussion Papers 1532R, Cowles Foundation for Research in Economics, Yale University, revised Jan 2006.
    4. Dirk Bergemann & Juuso Valimaki, 2002. "Information Acquisition and Efficient Mechanism Design," Econometrica, Econometric Society, vol. 70(3), pages 1007-1033, May.
    5. repec:zbw:bofrdp:2012_008 is not listed on IDEAS
    6. Nicola Persico, 2000. "Information Acquisition in Auctions," Econometrica, Econometric Society, vol. 68(1), pages 135-148, January.
    7. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-599, June.
    8. Miettinen, Paavo, 2013. "Information acquisition during a Dutch auction," Journal of Economic Theory, Elsevier, vol. 148(3), pages 1213-1225.
    Full references (including those not matched with items on IDEAS)

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    2. repec:zbw:bofrdp:2017_005 is not listed on IDEAS
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    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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