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Pre-auction strategic communication

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  • Eric Yan

Abstract

High-stakes auctions are often preceded by nonbinding communication between bidders and the seller. I study a two-period model in which bidders privately send cheap-talk messages to the seller about their valuations before the seller decides whether to run a mechanism or take a forfeitable outside option. The seller has commitment within the second-period mechanism but not over how she uses first-period communication. In monotone bidder-symmetric equilibria, an unrestricted seller runs at most one mechanism on the equilibrium path: a second-price auction with a common reserve, and only when all bidders report values above a common threshold. Thus discriminatory auctions cannot arise in equilibrium, despite asymmetric on-path posteriors. With two bidders, the seller is better off, and can sometimes attain her full-commitment payoff, if she can commit ex-ante to second-price auctions with a common reserve.

Suggested Citation

  • Eric Yan, 2026. "Pre-auction strategic communication," Papers 2603.17733, arXiv.org, revised Jun 2026.
    • Handle: RePEc:arx:papers:2603.17733
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    File URL: https://arxiv.org/pdf/2603.17733
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    References listed on IDEAS

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    1. Bester, Helmut & Strausz, Roland, 2001. "Contracting with Imperfect Commitment and the Revelation Principle: The Single Agent Case," Econometrica, Econometric Society, vol. 69(4), pages 1077-1098, July.
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