Optimal auctions with information acquisition

Xianwen Shi

Games and Economic Behavior, 2012, vol. 74, issue 2, 666-686

Abstract: This paper studies optimal auction design in a private value setting with endogenous information gathering. We develop a general framework for modeling information acquisition when a seller wants to sell an object to one of several potential buyers, who can each gather information about their valuations prior to participation in the auction. We first demonstrate that the optimal monopoly price is always lower than the standard monopoly price. We then show that standard auctions with a reserve price remain optimal among symmetric mechanisms, but the optimal reserve price lies between the ex ante mean valuation of bidders and the standard reserve price in Myerson (1981). Finally, we show that the optimal asymmetric mechanism softens the price discrimination against “strong” bidders.

Keywords: Optimal auctions; Information acquisition; Rotation order (search for similar items in EconPapers)
JEL-codes: C70 D44 D82 D86 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (54)

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Related works:
Working Paper: Optimal Auctions with Information Acquisition (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:74:y:2012:i:2:p:666-686

DOI: 10.1016/j.geb.2011.08.015

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