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A Note on Revenue Effects of Asymmetry in Private-Value Auctions

Author

Listed:
  • Todd R. Kaplan

    (Department of Economics, University of Exeter)

  • Shmuel Zamir

    (CNRS-EUREQua at Universite Paris1, LEI/CREST, France and the Hebrew University, Israel.)

Abstract

We formulate a way to study whether the asymmetry of buyers (in the sense of having different prior probability distributions of valuations) is helpful to the seller in private-value auctions (asked first by Cantillon [2001]). In our proposed formulation, this question corresponds to two important questions previously asked: Does a first-price auction have higher revenue than a second-price auction when buyers have asymmetric distributions (asked by Maskin and Riley[2000])? And does a seller enhance revenue by releasing information (asked by Milgrom and Weber[1982])? This is shown by constructing two Harsanyi games of incomplete information each having the same ex-ante distribution of valuations but in one beliefs are symmetric while in the other beliefs are sometimes asymmetric. Our main result is that answers to all three questions coincide when values are independent and are related when values are affiliated.

Suggested Citation

  • Todd R. Kaplan & Shmuel Zamir, 2001. "A Note on Revenue Effects of Asymmetry in Private-Value Auctions," Discussion Papers 0110, Exeter University, Department of Economics.
  • Handle: RePEc:exe:wpaper:0110
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    File URL: http://people.exeter.ac.uk/cc371/RePEc/dpapers/DP0110.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Eric Maskin & John Riley, 2000. "Asymmetric Auctions," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 413-438.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Lamping, Jennifer, 2008. "Ignorance Is Bliss: Matching in Auctions with an Uninformed Seller," MPRA Paper 24374, University Library of Munich, Germany.
    2. Cheng, Harrison, 2006. "Ranking sealed high-bid and open asymmetric auctions," Journal of Mathematical Economics, Elsevier, vol. 42(4-5), pages 471-498, August.
    3. repec:wsi:igtrxx:v:14:y:2012:i:03:n:s0219198912500193 is not listed on IDEAS
    4. Kaplan, Todd & Sela, Aner, 2003. "Auctions with Private Entry Costs," CEPR Discussion Papers 4080, C.E.P.R. Discussion Papers.
    5. Cheng, Harrison, 2011. "Asymmetry and revenue in first-price auctions," Economics Letters, Elsevier, vol. 111(1), pages 78-80, April.

    More about this item

    Keywords

    Asymmetric Auctions; Asymmetric Beliefs; Affiliation; Linkage Principle;

    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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