Information design in optimal auctions

Yi-Chun Chen and Xiangqian Yang

Journal of Economic Theory, 2023, vol. 212, issue C

Abstract: We study the information design problem in a single-unit auction setting. The information designer controls independent private signals according to which the buyers infer their binary private values. Assuming that the seller adopts the optimal auction due to Myerson (1981) in response, we characterize both the buyer-optimal information structure, which maximizes the buyers' surplus, and the seller-worst information structure, which minimizes the seller's revenue. We translate both information design problems into finite-dimensional, constrained optimization problems in which one can explicitly solve for the optimal information structure. In contrast to the case with one buyer (Roesler and Szentes, 2017), we show that with two or more buyers, the symmetric buyer-optimal information structure is different from the symmetric seller-worst information structure. The good is always sold under the seller-worst information structure but not under the buyer-optimal information structure. Nevertheless, as the number of buyers goes to infinity, both symmetric information structures converge to no disclosure. We also show that in our ex ante symmetric setting, an asymmetric information structure is never seller-worst but can generate a strictly higher surplus for the buyers than the symmetric buyer-optimal information structure.

Keywords: Information design; Optimal auction; Virtual value distribution; Buyer-optimal information; Seller-worst information (search for similar items in EconPapers)
JEL-codes: D44 D82 D83 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:212:y:2023:i:c:s0022053123001060

DOI: 10.1016/j.jet.2023.105710

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