Second-price auctions with information acquisition costs

Takaaki Abe (), Tsuyoshi Onda () and Takehiko Yamato ()
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Takaaki Abe: Kyushu University
Tsuyoshi Onda: Tokyo Institute of Technology
Takehiko Yamato: Institute of Science Tokyo

Economic Theory Bulletin, 2025, vol. 13, issue 1, No 2, 36 pages

Abstract: Abstract We analyze bidders’ information acquisition behaviors in second-price private value auctions. In our model, each bidder lacks knowledge for their own valuation of the object for sale and can only discover it by incurring a cost. We investigate the pure strategy equilibrium of information acquisition, providing conditions for the existence of equilibrium and proposing an algorithm for discovering all equilibria. Our findings suggest that the number of informed bidders remains constant across all equilibria. Furthermore, we demonstrate that the expected revenue is a decreasing function of the number of uninformed bidders.

Keywords: Acquisition costs; Equilibrium; Information acquisition; Second-price auction (search for similar items in EconPapers)
JEL-codes: C62 C72 D44 D82 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s40505-024-00277-7

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