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First-price auctions when the ranking of valuations is common knowledge

  • Jacob Rubinstein

    ()

    (Department of Mathematics, Technion, Haifa, Israel)

  • Elmar Wolfstetter

    ()

    (Department of Economics, Humboldt-University, Berlin, Germany)

  • Michael Landsberger

    ()

    (Department of Economics, Haifa University, 21905 Haifa, Israel)

  • Shmuel Zamir

    (Hebrew University, Jerusalem, Israel)

We consider a first-price auction when the ranking of bidders' private valuations is common knowledge among bidders. This new informational framework is motivated by several applications, from procurement to privatization. It induces a particular asymmetric auction model with affiliated private values that has several interesting properties but raises serious technical complications. We prove existence and uniqueness of equilibrium in pure strategies and show that the seller's reven generally higher in a first-price than in second-price and English auctions, in contrast to the ranking in the affiliated values model by Milgrom and Weber. This also implies that in first-price auctions, providing information concerning the ranking of valuations among bidders tends to increase the seller's expected revenue.

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Article provided by Springer in its journal Review of Economic Design.

Volume (Year): 6 (2001)
Issue (Month): 3 ()
Pages: 461-480

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Handle: RePEc:spr:reecde:v:6:y:2001:i:3:p:461-480
Note: Received: 31 March 2000 / Accepted: 27 October 2000
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