Multidimensional Private Value Auctions

Hanming Fang () and Stephen Morris ()

No 1423, Cowles Foundation Discussion Papers from Cowles Foundation, Yale University

Abstract: We consider parametric examples of two-bidder private value auctions in which each bidder observes her own private valuation as well as noisy signals about her opponentÌs private valuation. In such multidimensional private value auction environments, we show that the revenue equivalence between the first and second price auctions breaks down and there is no definite revenue ranking; while the second price auction is always efficient allocatively, the first price auction may be inefficient and the inefficiency may increase as the signal becomes more informative; equilibria may fail to exist for the first price auction. We also show that auction mechanisms provide different incentives for bidders to acquire costly information about opponents' valuation.

Keywords: Multidimensional Auctions; Revenue Equivalence; Allocative Efficiency; Information Acquisition (search for similar items in EconPapers)
JEL-codes: C70 D44 D82 (search for similar items in EconPapers)
Date: 2003-05
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Published in Journal of Economic Theory (2006), 126: 1-30

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http://cowles.econ.yale.edu/P/cd/d14a/d1423.pdf (application/pdf)

Related works:
Working Paper: Multidimensional Private Value Auctions (2004)
Working Paper: Multidimensional Private Value Auctions (2004)
Working Paper: Multidimensional Private Value Auctions (2004)
Journal Article: Multidimensional private value auctions (2006)
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