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Communication and efficiency in auctions

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  • Kos, Nenad

Abstract

We study auctions under restricted communication. Agents have valuations distributed over an interval but can only report one of a finite number of messages. We provide necessary conditions for welfare as well as revenue maximizing auctions in the independent private values case when bidders report simultaneously. We also show that the seller who chooses how to allocate a fixed number of messages allocates them evenly over all agents.

Suggested Citation

  • Kos, Nenad, 2012. "Communication and efficiency in auctions," Games and Economic Behavior, Elsevier, vol. 75(1), pages 233-249.
  • Handle: RePEc:eee:gamebe:v:75:y:2012:i:1:p:233-249
    DOI: 10.1016/j.geb.2011.10.002
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    References listed on IDEAS

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    1. Rothkopf, Michael H. & Harstad, Ronald M., 1994. "On the role of discrete bid levels in oral auctions," European Journal of Operational Research, Elsevier, vol. 74(3), pages 572-581, May.
    2. Bergemann, Dirk & Pesendorfer, Martin, 2007. "Information structures in optimal auctions," Journal of Economic Theory, Elsevier, vol. 137(1), pages 580-609, November.
    3. Fadel, Ronald & Segal, Ilya, 2009. "The communication cost of selfishness," Journal of Economic Theory, Elsevier, vol. 144(5), pages 1895-1920, September.
    4. Mount, Kenneth & Reiter, Stanley, 1974. "The informational size of message spaces," Journal of Economic Theory, Elsevier, vol. 8(2), pages 161-192, June.
    5. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
    6. Pierpaolo Battigalli & Giovanni Maggi, 2002. "Rigidity, Discretion, and the Costs of Writing Contracts," American Economic Review, American Economic Association, vol. 92(4), pages 798-817, September.
    7. R. Preston McAfee, 2002. "Coarse Matching," Econometrica, Econometric Society, vol. 70(5), pages 2025-2034, September.
    8. Wilson, Robert B, 1989. "Efficient and Competitive Rationing," Econometrica, Econometric Society, vol. 57(1), pages 1-40, January.
    9. Athey, Susan, 2001. "Single Crossing Properties and the Existence of Pure Strategy Equilibria in Games of Incomplete Information," Econometrica, Econometric Society, vol. 69(4), pages 861-889, July.
    10. Milgrom, Paul, 2010. "Simplified mechanisms with an application to sponsored-search auctions," Games and Economic Behavior, Elsevier, vol. 70(1), pages 62-70, September.
    11. Nenad Kos, 2011. "Asking Questions," Working Papers 405, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
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    Citations

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    Cited by:

    1. Sher, Itai & Vohra, Rakesh, 2015. "Price discrimination through communication," Theoretical Economics, Econometric Society, vol. 10(2), May.
    2. Dirk Bergemann & Ji Shen & Yun Xu & Edmund M. Yeh, 2015. "Nonlinear Pricing with Finite Information," Cowles Foundation Discussion Papers 1981, Cowles Foundation for Research in Economics, Yale University.
    3. Wong, Adam Chi Leung, 2014. "The choice of the number of varieties: Justifying simple mechanisms," Journal of Mathematical Economics, Elsevier, vol. 54(C), pages 7-21.
    4. Kos, Nenad, 2014. "Asking questions," Games and Economic Behavior, Elsevier, vol. 87(C), pages 642-650.
    5. Blumrosen, Liad & Feldman, Michal, 2013. "Mechanism design with a restricted action space," Games and Economic Behavior, Elsevier, vol. 82(C), pages 424-443.

    More about this item

    Keywords

    Mechanism design; Message space; Communication complexity;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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