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Bidder Disclosure and Entry Deterrence in Second-Price Auctions

Author

Listed:
  • Tiago Botelho

  • Felipe Shalders

Abstract

We study disclosure by an incumbent bidder in a second-price auction with costly entry. Before a potential entrant decides whether to enter and learn his value, the incumbent commits to a binary disclosure rule about her own value. In equilibrium, the incumbent chooses an informative threshold rule: low reported values induce entry, while high reported values deter it. Under truthful bidding, disclosure does not weaken the incumbent’s bidding incentives. Instead, it changes the entrant’s expected surplus from participating. As a result, incumbent disclosure lowers expected seller revenue relative to the no-communication benchmark.

Suggested Citation

  • Tiago Botelho & Felipe Shalders, 2026. "Bidder Disclosure and Entry Deterrence in Second-Price Auctions," Working Papers, Department of Economics 2026_21, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2026wpecon21
    as

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    References listed on IDEAS

    as
    1. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721, June.
    2. Juan-José Ganuza, 2004. "Ignorance Promotes Competition: An Auction Model of Endogenous Private Valuations," RAND Journal of Economics, The RAND Corporation, vol. 35(3), pages 583-598, Autumn.
    3. 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.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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