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Information acquisition in auctions: Sealed bids vs. open bids

  • Hernando-Veciana, Ángel

This paper studies the incentives of a bidder to acquire information in an auction when her information acquisition decision is observed by the other bidders before bidding. Our results show that the sealed bid (second price) auction may induce more information acquisition about a common component of the value than the open (English) auction but less about the private component of the value. Moreover, we show that more information about the private value and less information about the common value may improve efficiency and revenue. Consequently, our results suggest new arguments in favor of the open auction.

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File URL: http://www.sciencedirect.com/science/article/pii/S0899-8256(08)00052-3
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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 65 (2009)
Issue (Month): 2 (March)
Pages: 372-405

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Handle: RePEc:eee:gamebe:v:65:y:2009:i:2:p:372-405
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  20. Engelbrecht-Wiggans, Richard, 2001. "The effect of entry and information costs on oral versus sealed-bid auctions," Economics Letters, Elsevier, vol. 70(2), pages 195-202, February.
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  25. Hausch, Donald B & Li, Lode, 1993. "A Common Value Auction Model with Endogenous Entry and Information Acquisition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(2), pages 315-34, April.
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