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Endogenous Information Acquisition on Opponents' Valuations in Multidimensional First Price Auctions

  • Tian, Guoqiang
  • Xiao, Mingjun

This paper investigates bidder's covert behavior of endogenous information acquisition on her opponents' valuations in first price auction model with independent private values. Such an information acquisition setting leads to bidimensional type space and bidimensional strategy space. We consider two different specifications of the environments: the ex ante information acquisition setting and the interim information acquisition setting. In equilibria the expected payoffs of the bidder under these specifications could exceed the counterpart payoffs of the corresponding standard sealed-bid auctions without information acquisition as long as the cost is small, but the auctioneer has lower payoffs in these models than those of the standard ones. Moreover, the incurred information cost becomes the deadweight loss, resulting in ine±cient outcomes.

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File URL: https://mpra.ub.uni-muenchen.de/41214/1/MPRA_paper_41214.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 41214.

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Date of creation: Sep 2007
Date of revision: Jan 2010
Handle: RePEc:pra:mprapa:41214
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  1. Stephen Morris & Hanming Fang, 2004. "Multidimensional Private Value Auctions," Econometric Society 2004 North American Winter Meetings 174, Econometric Society.
  2. Arozamena, Leandro & Cantillon, Estelle, 2001. "Investment Incentives in Procurement Auctions," CEPR Discussion Papers 2676, C.E.P.R. Discussion Papers.
  3. Eric Maskin & John Riley, 2000. "Equilibrium in Sealed High Bid Auctions," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 439-454.
  4. Maskin, Eric S & Riley, John G, 1984. "Optimal Auctions with Risk Averse Buyers," Econometrica, Econometric Society, vol. 52(6), pages 1473-1518, November.
  5. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Series Working Papers 2004-W09, University of Oxford, Department of Economics.
  6. Oliver Kirchkamp, & Eva Poen, & Philipp Reiß, 2006. "Outside options: Another reason to choose the first-price auction," CRIEFF Discussion Papers 0605, Centre for Research into Industry, Enterprise, Finance and the Firm.
  7. 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.
  8. Guzman, Rolando M & Kolstad, Charles D., 1997. "Auction Equilibrium with Costly Information Acquisition," University of California at Santa Barbara, Economics Working Paper Series qt4w0787ng, Department of Economics, UC Santa Barbara.
  9. Ángel Hernando Veciana, 2006. "Information Acquisition In Auctions: Sealed Bids Vs. Open Bids," Working Papers. Serie AD 2006-10, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  10. Mount, Kenneth & Reiter, Stanley, 1974. "The informational size of message spaces," Journal of Economic Theory, Elsevier, vol. 8(2), pages 161-192, June.
  11. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Papers 2004-W09, Economics Group, Nuffield College, University of Oxford.
  12. Milgrom, Paul R, 1981. "Rational Expectations, Information Acquisition, and Competitive Bidding," Econometrica, Econometric Society, vol. 49(4), pages 921-43, June.
  13. Xianwen Shi, 2007. "Optimal Auctions with Information Acquisition," Working Papers tecipa-302, University of Toronto, Department of Economics.
  14. Tom K. Lee, 1984. "Incomplete Information, High-Low Bidding and Public Information in First Price Auctions," Management Science, INFORMS, vol. 30(12), pages 1490-1496, December.
  15. Paul Klemperer, 2004. "Introduction to Auctions: Theory and Practice," Introductory Chapters, in: Auctions: Theory and Practice Princeton University Press.
  16. Kolstad, Charles D., 1997. "A Model of Auction Equilibrium with Costly Information Acquisition," University of California at Santa Barbara, Economics Working Paper Series qt4502p3n4, Department of Economics, UC Santa Barbara.
  17. Juan José Ganuza, 2003. "Ignorance promotes competition: An auction model with endogenous private valuations," Economics Working Papers 671, Department of Economics and Business, Universitat Pompeu Fabra.
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