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Information Design in Optimal Auctions

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  • Yi-Chun Chen
  • Xiangqian Yang

Abstract

We study the information design problem in a single-unit auction setting. The information designer controls independent private signals according to which the buyers infer their binary private values. Assuming that the seller adopts the optimal auction due to Myerson (1981) in response, we characterize both the buyer-optimal information structure, which maximizes the buyers' surplus, and the sellerworst information structure, which minimizes the seller's revenue. We translate both information design problems into finite-dimensional, constrained optimization problems in which one can explicitly solve for the optimal information structures. In contrast to the case with one buyer (Roesler and Szentes, 2017), we show that with two or more buyers, the symmetric buyer-optimal information structure is different from the symmetric seller-worst information structure. The good is always sold under the seller-worst information structure but not under the buyer-optimal information structure. Nevertheless, as the number of buyers goes to infinity, both symmetric information structures converge to no disclosure. We also show that in an ex ante symmetric setting, an asymmetric information structure is never seller-worst but can generate a strictly higher surplus for the buyers than the symmetric buyer-optimal information structure.

Suggested Citation

  • Yi-Chun Chen & Xiangqian Yang, 2020. "Information Design in Optimal Auctions," Papers 2010.08990, arXiv.org, revised Oct 2022.
    • Handle: RePEc:arx:papers:2010.08990
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    References listed on IDEAS

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    1. Anne-Katrin Roesler & Balázs Szentes, 2017. "Buyer-Optimal Learning and Monopoly Pricing," American Economic Review, American Economic Association, vol. 107(7), pages 2072-2080, July.
    2. Terstiege, Stefan & Wasser, Cédric, 2020. "Buyer-optimal extensionproof information," Journal of Economic Theory, Elsevier, vol. 188(C).
    3. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    4. Dirk Bergemann & Benjamin Brooks & Stephen Morris, 2016. "Informationally Robust Optimal Auction Design," Working Papers 084_2016, Princeton University, Department of Economics, Econometric Research Program..
    5. Monteiro, Paulo Klinger & Svaiter, Benar Fux, 2010. "Optimal auction with a general distribution: Virtual valuation without densities," Journal of Mathematical Economics, Elsevier, vol. 46(1), pages 21-31, January.
    6. Bergemann, Dirk & Pesendorfer, Martin, 2007. "Information structures in optimal auctions," Journal of Economic Theory, Elsevier, vol. 137(1), pages 580-609, November.
    7. Alex Suzdaltsev, 2020. "Distributionally Robust Pricing in Independent Private Value Auctions," Papers 2008.01618, arXiv.org, revised Aug 2020.
    8. Songzi Du, 2018. "Robust Mechanisms Under Common Valuation," Econometrica, Econometric Society, vol. 86(5), pages 1569-1588, September.
    9. Carrasco, Vinicius & Farinha Luz, Vitor & Kos, Nenad & Messner, Matthias & Monteiro, Paulo & Moreira, Humberto, 2018. "Optimal selling mechanisms under moment conditions," Journal of Economic Theory, Elsevier, vol. 177(C), pages 245-279.
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    Cited by:

    1. Fina, Bernadette & Roberts, Mike B. & Auer, Hans & Bruce, Anna & MacGill, Iain, 2021. "Exogenous influences on deployment and profitability of photovoltaics for self-consumption in multi-apartment buildings in Australia and Austria," Applied Energy, Elsevier, vol. 283(C).
    2. Wanchang Zhang, 2022. "Information-Robust Optimal Auctions," Papers 2205.04137, arXiv.org.

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