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Information Aggregation in Auctions with an Unknown Number of Bidders

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Abstract

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.

Suggested Citation

  • Ronald M. Harstad & Aleksandar Pekec & Ilia Tsetlin, 2005. "Information Aggregation in Auctions with an Unknown Number of Bidders," Working Papers 0605, Department of Economics, University of Missouri.
  • Handle: RePEc:umc:wpaper:0605
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    References listed on IDEAS

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    1. Milgrom, Paul R, 1981. "Rational Expectations, Information Acquisition, and Competitive Bidding," Econometrica, Econometric Society, vol. 49(4), pages 921-943, June.
    2. John G. Riley, 1988. "Ex Post Information in Auctions," Review of Economic Studies, Oxford University Press, vol. 55(3), pages 409-429.
    3. Milgrom, Paul R, 1979. "A Convergence Theorem for Competitive Bidding with Differential Information," Econometrica, Econometric Society, vol. 47(3), pages 679-688, May.
    4. 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 257-267, April.
    5. Matthews, Steven, 1987. "Comparing Auctions for Risk Averse Buyers: A Buyer's Point of View," Econometrica, Econometric Society, vol. 55(3), pages 633-646, May.
    6. Klemperer, Paul, 1999. " Auction Theory: A Guide to the Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 13(3), pages 227-286, July.
    7. 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.
    8. Ilan Kremer, 2002. "Information Aggregation in Common Value Auctions," Econometrica, Econometric Society, vol. 70(4), pages 1675-1682, July.
    9. Robert Wilson, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 511-518.
    10. 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.
    11. 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.
    12. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
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    Cited by:

    1. Bos, Olivier, 2012. "Wars of attrition and all-pay auctions with stochastic competition," Journal of Mathematical Economics, Elsevier, vol. 48(2), pages 83-91.
    2. Olivier Bos, 2010. "Wars of Attrition with Stochastic Competition," Working Paper Series in Economics 47, University of Cologne, Department of Economics.
    3. Ronald M. Harstad, 2007. "Does a Seller Really Want Another Bidder?," Working Papers 0711, Department of Economics, University of Missouri.
    4. Aleksandar Saša Pekev{c} & Ilia Tsetlin, 2008. "Revenue Ranking of Discriminatory and Uniform Auctions with an Unknown Number of Bidders," Management Science, INFORMS, vol. 54(9), pages 1610-1623, September.

    More about this item

    Keywords

    information aggregation; common-value auctions; uncertain level of competition;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition

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