Private value perturbations and informational advantage in common value auctions

Nathan Larson

Games and Economic Behavior, 2009, vol. 65, issue 2, 430-460

Abstract: We analyze the value of being better informed than one's rival in a two bidder, second price common value auction. Standard models of these auctions do not pin down relative bidding postures, but we show that by adding small amounts of private value information, a unique equilibrium can be restored. Additional common value information affects a bidder's payoff both directly, by increasing his information rent, and indirectly, by shifting the relative bidding posture of his opponent. Although the latter effect need not be positive, we establish broad conditions under which bidders with more information do better than their rivals. We turn to information acquisition and release and show that the desire to influence relative bidding postures can lead sellers to create new information rents (by releasing information privately to only one bidder) and bidders to forego information rents (instead choosing to gather information that a rival already has).

Keywords: Common; value; auction; Differential; information (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0899-8256(08)00059-6
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:65:y:2009:i:2:p:430-460

Access Statistics for this article

Games and Economic Behavior is currently edited by E. Kalai

More articles in Games and Economic Behavior from Elsevier
Bibliographic data for series maintained by Catherine Liu ().