Optimal Information Disclosure in Classic Auctions Revisited: Endogenous Information Acquisition and Costly Verification

Guoqiang Tian

Papers from arXiv.org

Abstract: We revisit the influential distribution-independent optimal disclosure result of Bergemann, Heumann, Morris, Sorokin, and Winter (2022), whose optimal disclosure policy reveals low bidder values and pools high values at a critical quantile depending only on the number of bidders, and show that this policy is no longer generally revenue-maximizing even for the familiar uniform and binary valuation distributions, once bidders can endogenously acquire private information through costly verification. The underlying reason reflects a fundamental principle of incentive-based mechanism design, rooted in Hurwicz's analysis of structural invariance and echoed in the Lucas critique: economic agents respond strategically to changes in the information and incentives they face. This is the essence of \emph{trust, but verify}. A change in disclosure policy may leave the underlying economic primitives unchanged while altering bidders' verification decisions and the resulting equilibrium information structure. We establish existence and uniqueness of the symmetric Bayesian Nash verification equilibrium, characterize equilibrium-implementable disclosure policies, and derive an exact revenue decomposition and a general characterization of global optimality. We further develop optimality conditions and structural results that provide a systematic foundation for analyzing optimal disclosure with endogenous information acquisition.

Date: 2026-10
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