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Ignorance Is Bliss: Matching in Auctions with an Uninformed Seller

  • Lamping, Jennifer

In many auctions, matching between the bidder and seller raises the value of the contract for both parties. However, information about the quality of the match may be incomplete. We consider the case in which each bidder observes the quality of his match with the seller but the seller does not observe the quality of his matches with the bidders. Our objective is to determine whether it is in the seller's interest to observe the matches before selecting the winner. It is shown that the seller’s value for the information may be negative: the seller’s knowledge of the matches generates an asymmetry across bidders which depresses bids. The more matching matters, the greater the penalty associated with observing the matches.

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File URL: http://mpra.ub.uni-muenchen.de/24374/1/MPRA_paper_24374.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 24374.

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Date of creation: 14 Aug 2008
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Handle: RePEc:pra:mprapa:24374
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  12. Milgrom, Paul R, 1981. "Rational Expectations, Information Acquisition, and Competitive Bidding," Econometrica, Econometric Society, vol. 49(4), pages 921-43, June.
  13. Yeon-Koo Che, 1993. "Design Competition through Multidimensional Auctions," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 668-680, Winter.
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