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Information acquisition during a descending price auction with asymmetrically informed players

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  • Miettinen, Paavo

Abstract

This paper considers equilibrium behavior in a descending price auction with two players that are asymmetrically informed. The ”informed” player knows his valuation while the other does not. The uninformed player can acquire information about his valuation with a positive cost during the auction. We assume that the information acquisition activity is covert and we characterize the equilibrium behavior in the setting where players’ valuations are independently and identically distributed. We derive the explicit ”inverse bid” functions in the case of the uniformly distributed valuations and provide a revenue comparison between the ascending and descending price auctions in this case.

Suggested Citation

  • Miettinen, Paavo, 2017. "Information acquisition during a descending price auction with asymmetrically informed players," Research Discussion Papers 5/2017, Bank of Finland.
  • Handle: RePEc:bof:bofrdp:2017_005
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    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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