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Information Aggregation in Auctions with an Unknown Number of Bidders

Information aggregation, a key concern for uniform-price, common-value auctionswith many bidders, has been characterized in models where bidders know exactly how many rivals they face. A model allowing for uncertainty over the number of bidders isessential for capturing a critical condition for information to aggregate: as the numbersof winning and losing bidders grow large, information aggregates if and only ifuncertainty about the fraction of winning bidders vanishes. It is possible for the sellerto impart this information by precommitting to a specified fraction of winning bidders,via a proportional selling policy. Intuitively, this makes the proportion of winners known, and thus provides all the information that bidders need to make winners curse corrections.

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Paper provided by Department of Economics, University of Missouri in its series Working Papers with number 0605.

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Length: 38 pgs.
Date of creation: 27 Dec 2005
Date of revision:
Handle: RePEc:umc:wpaper:0605
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  1. Rothkopf, Michael H & Harstad, Ronald M, 1995. "Two Models of Bid-Taker Cheating in Vickrey Auctions," The Journal of Business, University of Chicago Press, vol. 68(2), pages 257-67, April.
  2. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
  3. Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Economics Series Working Papers 1999-W12, University of Oxford, Department of Economics.
  4. John G. Riley, 1988. "Ex Post Information in Auctions," Review of Economic Studies, Oxford University Press, vol. 55(3), pages 409-429.
  5. Harstad, Ronald M. & Kagel, John H. & Levin, Dan, 1990. "Equilibrium bid functions for auctions with an uncertain number of bidders," Economics Letters, Elsevier, vol. 33(1), pages 35-40, May.
  6. Hong, Han & Shum, Matthew, 2004. "Rates of information aggregation in common value auctions," Journal of Economic Theory, Elsevier, vol. 116(1), pages 1-40, May.
  7. Wolfgang Pesendorfer & Jeroen M. Swinkels, 1997. "The Loser's Curse and Information Aggregation in Common Value Auctions," Econometrica, Econometric Society, vol. 65(6), pages 1247-1282, November.
  8. Milgrom, Paul R, 1981. "Rational Expectations, Information Acquisition, and Competitive Bidding," Econometrica, Econometric Society, vol. 49(4), pages 921-43, June.
  9. Robert Wilson, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 511-518.
  10. Ilan Kremer, 2002. "Information Aggregation in Common Value Auctions," Econometrica, Econometric Society, vol. 70(4), pages 1675-1682, July.
  11. Milgrom, Paul R, 1979. "A Convergence Theorem for Competitive Bidding with Differential Information," Econometrica, Econometric Society, vol. 47(3), pages 679-88, May.
  12. Matthews, Steven, 1987. "Comparing Auctions for Risk Averse Buyers: A Buyer's Point of View," Econometrica, Econometric Society, vol. 55(3), pages 633-46, May.
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