Common Value Allocation Mechanisms with Private Information: Lotteries or Auctions?
We consider mechanisms for allocating a common-value prize between two players in an incomplete information setting. In this setting, each player receives an independent private signal about the prize value. The signals are from a discrete distribution and the value is increasing in both signals. First, we characterize symmetric equilibria in four mechanisms: a lottery; and Â…rst-price, second-price, and all-pay auctions. Second, we establish revenue equivalence of these auction mechanisms in this setting. Third, we describe conditions under which the expected revenue is higher in the lottery than in any of the auctions. Finally, we identify an optimal mechanism and its implementation by means of reserve prices in lottery and auction mechanisms.
|Date of creation:||Jul 2014|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (44) 0115 951 5620
Fax: (0115) 951 4159
Web page: http://www.nottingham.ac.uk/economics/cedex/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Eric S. Maskin & John G. Riley, 1985.
"Auction Theory with Private Values,"
UCLA Economics Working Papers
359, UCLA Department of Economics.
- Klemperer, Paul, 1998.
"Auctions with almost common values: The 'Wallet Game' and its applications,"
European Economic Review,
Elsevier, vol. 42(3-5), pages 757-769, May.
- Paul Klemperer, 1997. "Auctions with Almost Common Values: The Wallet Game and its Applications," Economics Series Working Papers 1998-W03, University of Oxford, Department of Economics.
- Alexander Matros, 2007.
"Contests with a Stochastic Number of Players,"
323, University of Pittsburgh, Department of Economics, revised Sep 2008.
- Wilson, Robert, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 511-18, October.
- Franke, Jörg & Kanzow, Christian & Leininger, Wolfgang & Schwartz, Alexandra, 2014.
"Lottery versus all-pay auction contests: A revenue dominance theorem,"
Games and Economic Behavior,
Elsevier, vol. 83(C), pages 116-126.
- Franke, Jörg & Kanzow, Christian & Leininger, Wolfgang & Schwartz, Alexandra, 2013. "Lottery versus All-Pay Auction Contests: A Revenue Dominance Theorem," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79998, Verein für Socialpolitik / German Economic Association.
- Jörg Franke & Christian Kanzow & Wolfgang Leininger & Alexandra Schwartz, 2012. "Lottery versus All-Pay Auction Contests – A Revenue Dominance Theorem," Ruhr Economic Papers 0315, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
- Johannes Münster, 2009. "Repeated Contests with Asymmetric Information," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(1), pages 89-118, 02.
- Kai A. Konrad, 2002.
"Altruism and Envy in Contests: An Evolutionarily Stable Symbiosis,"
CESifo Working Paper Series
825, CESifo Group Munich.
- Kai A. Konrad, 2004. "Altruism and envy in contests: An evolutionarily stable symbiosis," Social Choice and Welfare, Springer, vol. 22(3), pages 479-490, 06.
- Konrad, Kai A., 2002.
"Altruism and envy in contests: an evolutionarily stable symbiosis
[Altruismus und Neid in Turnieren: Eine evolutionär-stabile Symbiose]," Discussion Papers, Research Unit: Market Processes and Governance FS IV 02-19, Social Science Research Center Berlin (WZB).
- Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603, March.
- Cédric Wasser, 2013.
"Incomplete information in rent-seeking contests,"
Springer, vol. 53(1), pages 239-268, May.
- Wasser, Cédric, 2010. "Rent-seeking Contests under Symmetric and Asymmetric Information," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 311, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Wärneryd, Karl, 2013. "Common-value contests with asymmetric information," Economics Letters, Elsevier, vol. 120(3), pages 525-527.
- Harstad, Ronald M, 1990. "Alternative Common-Value Auction Procedures: Revenue Comparisons with Free Entry," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 421-29, April.
- Malueg, David A. & Orzach, Ram, 2009. "Revenue comparison in common-value auctions: Two examples," Economics Letters, Elsevier, vol. 105(2), pages 177-180, November.
- Wang, Ruqu, 1991. "Common-value auctions with discrete private information," Journal of Economic Theory, Elsevier, vol. 54(2), pages 429-447, August.
- Karl Wärneryd, 2012. "Multi-player contests with asymmetric information," Economic Theory, Springer, vol. 51(2), pages 277-287, October.
- Gil S. Epstein & Yosef Mealem & Shmuel Nitzan, 2011.
"Lotteries vs. All-Pay Auctions in Fair and Biased Contests,"
2011-29, Bar-Ilan University, Department of Economics.
- Gil S. Epstein & Yosef Mealem & Shmuel Nitzan, 2013. "Lotteries vs. All-Pay Auctions in Fair and Biased Contests," Economics and Politics, Wiley Blackwell, vol. 25(1), pages 48-60, 03.
- Epstein, Gil S. & Mealem, Yosef & Nitzan, Shmuel, 2012. "Lotteries vs. All-Pay Auctions in Fair and Biased Contests," IZA Discussion Papers 7032, Institute for the Study of Labor (IZA).
- Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
- 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.
When requesting a correction, please mention this item's handle: RePEc:not:notcdx:2014-07. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Suzanne Robey)
If references are entirely missing, you can add them using this form.