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Multidimensional Private Value Auctions

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  • Stephen Morris
  • Hanming Fang

Abstract

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 opponent’s 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 illustrate that auction mechanisms provide different incentives for bidders to acquire costly information about opponents’ valuation

Suggested Citation

  • Stephen Morris & Hanming Fang, 2004. "Multidimensional Private Value Auctions," Econometric Society 2004 North American Winter Meetings 174, Econometric Society.
    • Handle: RePEc:ecm:nawm04:174
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    More about this item

    Keywords

    Multidimensional Auctions; Revenue Equivalence; Allocative Efficiency; Information Acquisition;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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