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Dominance solvability of second-price auctions with differential information

Author

Listed:
  • EINY, Ezra
  • HAIMANKO, Ori
  • ORZACH, Ram
  • SELA, Aner

Abstract

We study a class of common-value second-price auctions with differential information. This class of common-value auctions is characterized by the property that each player's information set is connected with respect to the common value. We showthat the entire class is dominance solvable, and that there is a natural single-valued selection from the resulting set of sophisticated equilibria. Additionally, it is shown that bidder's information advantage over others is rewarded in sophisticated equilibria.

Suggested Citation

  • EINY, Ezra & HAIMANKO, Ori & ORZACH, Ram & SELA, Aner, 2001. "Dominance solvability of second-price auctions with differential information," CORE Discussion Papers 2001007, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2001007
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    References listed on IDEAS

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    1. Klemperer, Paul, 1999. " Auction Theory: A Guide to the Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 13(3), pages 227-286, July.
    2. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
    3. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, March.
    4. Milgrom, Paul & Weber, Robert J., 1982. "The value of information in a sealed-bid auction," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 105-114, June.
    5. Vohra, Rajiv, 1999. "Incomplete Information, Incentive Compatibility, and the Core," Journal of Economic Theory, Elsevier, vol. 86(1), pages 123-147, May.
    6. Wilson, Robert, 1992. "Strategic analysis of auctions," Handbook of Game Theory with Economic Applications,in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 8, pages 227-279 Elsevier.
    7. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
    8. Robert Wilson, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 511-518.
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    Citations

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    Cited by:

    1. Ezra Einy & Ori Haimanko & Ram Orzach & Aner Sela, 2016. "Common-value all-pay auctions with asymmetric information and bid caps," International Journal of Game Theory, Springer;Game Theory Society, vol. 45(1), pages 63-88, March.
    2. Forges, Françoise & Orzach, Ram, 2011. "Core-stable rings in second price auctions with common values," Journal of Mathematical Economics, Elsevier, vol. 47(6), pages 760-767.
    3. Aner Sela & Ezra Einy & 0ri Haimanko & Diego Moreno & Avishay Aiche & Benyamin Shitovitz, 2016. "Information Advantage in Common-Value Classic Tullock Contests," Working Papers 1614, Ben-Gurion University of the Negev, Department of Economics.
    4. repec:spr:jogath:v:46:y:2017:i:1:d:10.1007_s00182-015-0524-4 is not listed on IDEAS
    5. Ezra Einy & Mridu Prabal Goswami & Ori Haimanko & Ram Orzach & Aner Sela, 2017. "Common-value all-pay auctions with asymmetric information," International Journal of Game Theory, Springer;Game Theory Society, vol. 46(1), pages 79-102, March.
    6. A. Aiche & Ezra Einy & Aner Sela & Ori Haimanko & Diego Moreno & B. Shitovitz, 2017. "Information In Tullock Contests," Working Papers 1710, Ben-Gurion University of the Negev, Department of Economics.
    7. Azrieli, Yaron & Levin, Dan, 2011. "Dominance-solvable common-value large auctions," Games and Economic Behavior, Elsevier, vol. 73(2), pages 301-309.
    8. Azrieli Yaron & Levin Dan, 2012. "Dominance Solvability of Large k-Price Auctions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 12(1), pages 1-11, May.
    9. Malueg, David A. & Orzach, Ram, 2009. "Revenue comparison in common-value auctions: Two examples," Economics Letters, Elsevier, vol. 105(2), pages 177-180, November.

    More about this item

    Keywords

    common-value second-price auctions; differential information; connectedness with respect to common value; dominance solvability; sophisticated equilibria; information advantage;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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