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Multidimensional Private Value Auctions

We consider parametric examples of two-bidder private value auctions in which each bidder observes her own private valuation as well as noisy signals about her opponentÌs private valuation. In such multidimensional private value auction environments, we show that the revenue equivalence between the first and second price auctions breaks down and there is no definite revenue ranking; while the second price auction is always efficient allocatively, the first price auction may be inefficient and the inefficiency may increase as the signal becomes more informative; equilibria may fail to exist for the first price auction. We also show that auction mechanisms provide different incentives for bidders to acquire costly information about opponents' valuation.

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File URL: http://cowles.econ.yale.edu/P/cd/d14a/d1423.pdf
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Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1423.

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Length: 40 pages
Date of creation: May 2003
Date of revision:
Publication status: Published in Journal of Economic Theory (2006), 126: 1-30
Handle: RePEc:cwl:cwldpp:1423
Contact details of provider: Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.econ.yale.edu/

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  1. Richard McLean & Andrew Postlewaite, 2002. "Informational Size and Efficient Auctions," PIER Working Paper Archive 03-011, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 13 Apr 2003.
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  3. Maskin, Eric & Riley, John, 2000. "Asymmetric Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 413-38, July.
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  6. Stephen Morris & Hanming Fang, 2004. "Multidimensional Private Value Auctions," Yale School of Management Working Papers ysm387, Yale School of Management.
  7. Leandro Arozamena & Estelle Cantillon, 2004. "Investment incentives in procurement auctions," ULB Institutional Repository 2013/9005, ULB -- Universite Libre de Bruxelles.
  8. Jacob Rubinstein & Elmar Wolfstetter & Michael Landsberger & Shmuel Zamir, 2001. "First-price auctions when the ranking of valuations is common knowledge," Review of Economic Design, Springer, vol. 6(3), pages 461-480.
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  11. Cantillon, Estelle, 2008. "The effect of bidders' asymmetries on expected revenue in auctions," Games and Economic Behavior, Elsevier, vol. 62(1), pages 1-25, January.
  12. Mireia Jofre-Bonet & Martin Pesendorfer, 2001. "Estimation of a Dynamic Auction Game," NBER Working Papers 8626, National Bureau of Economic Research, Inc.
  13. Steven A. Matthews, 1985. "Comparing Auctions for Risk Averse Buyers: A Buyer's Pointof View," Discussion Papers 664R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  14. Cremer, Jacques & McLean, Richard P, 1985. "Optimal Selling Strategies under Uncertainty for a Discriminating Monopolist When Demands Are Interdependent," Econometrica, Econometric Society, vol. 53(2), pages 345-61, March.
  15. Kim, Jinwoo & Che, Yeon-Koo, 2004. "Asymmetric information about rivals' types in standard auctions," Games and Economic Behavior, Elsevier, vol. 46(2), pages 383-397, February.
  16. Maskin, Eric S & Riley, Joan G, 1985. "Auction Theory with Private Values," American Economic Review, American Economic Association, vol. 75(2), pages 150-55, May.
  17. Kenneth Mount & Stanley Reiter, 1973. "The Informational Size of Message Spaces," Discussion Papers 3, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  18. Wilson, Robert, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 511-18, October.
  19. James Andreoni & Yeon-Koo Che & Jinwoo Kim, 2006. "Asymmetric Information about Rivals’ Types in Standard Auctions: An Experiment," Levine's Bibliography 321307000000000293, UCLA Department of Economics.
  20. Athey, Susan, 2001. "Single Crossing Properties and the Existence of Pure Strategy Equilibria in Games of Incomplete Information," Econometrica, Econometric Society, vol. 69(4), pages 861-89, July.
  21. Campbell, Colin M. & Levin, Dan, 2000. "Can the Seller Benefit from an Insider in Common-Value Auctions?," Journal of Economic Theory, Elsevier, vol. 91(1), pages 106-120, March.
  22. Battigalli, Pierpaolo & Siniscalchi, Marciano, 2003. "Rationalizable bidding in first-price auctions," Games and Economic Behavior, Elsevier, vol. 45(1), pages 38-72, October.
  23. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  24. Yossi Feinberg & Andrzej Skrzypacz, 2005. "Uncertainty about Uncertainty and Delay in Bargaining," Econometrica, Econometric Society, vol. 73(1), pages 69-91, 01.
  25. Maskin, Eric & Riley, John, 2000. "Equilibrium in Sealed High Bid Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 439-54, July.
  26. Plum, M, 1992. "Characterization and Computation of Nash-Equilibria for Auctions with Incomplete Information," International Journal of Game Theory, Springer, vol. 20(4), pages 393-418.
  27. Wang, Ruqu, 1991. "Common-value auctions with discrete private information," Journal of Economic Theory, Elsevier, vol. 54(2), pages 429-447, August.
  28. Nicola Persico, 1997. "Information Acquisition in Auctions," UCLA Economics Working Papers 762, UCLA Department of Economics.
  29. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  30. Matthew O. Jackson & Leo K. Simon & Jeroen M. Swinkels & William R. Zame, 2002. "Communication and Equilibrium in Discontinuous Games of Incomplete Information," Econometrica, Econometric Society, vol. 70(5), pages 1711-1740, September.
  31. Dekel, Eddie & Wolinsky, Asher, 2003. "Rationalizable outcomes of large private-value first-price discrete auctions," Games and Economic Behavior, Elsevier, vol. 43(2), pages 175-188, May.
  32. Philip J. Reny & Shmuel Zamir, 2002. "On the Existence of Pure Strategy Monotone Equilibria in Asymmetric First-Price Auctions," Discussion Paper Series dp292, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
  33. Neeman, Z., 1998. "The Relevance of Private Infromation in Mechanism Design," Papers 93, Boston University - Department of Economics.
  34. Maskin, Eric S & Riley, John G, 1984. "Optimal Auctions with Risk Averse Buyers," Econometrica, Econometric Society, vol. 52(6), pages 1473-1518, November.
  35. Che, Yeon-Koo & Gale, Ian, 1998. "Standard Auctions with Financially Constrained Bidders," Review of Economic Studies, Wiley Blackwell, vol. 65(1), pages 1-21, January.
  36. Feinberg, Yossi & Skyzypacz, Andrzej, 2002. "Uncertainty about Uncertainty and Delay in Bargaining," Research Papers 1765, Stanford University, Graduate School of Business.
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