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Information acquisition during a descending price auction with asymmetrically informed players

Paavo Miettinen

No 5/2017, Research Discussion Papers from Bank of Finland

Abstract: This paper considers equilibrium behavior in a descending price auction with two players that are asymmetrically informed. The ”informed” player knows his valuation while the other does not. The uninformed player can acquire information about his valuation with a positive cost during the auction. We assume that the information acquisition activity is covert and we characterize the equilibrium behavior in the setting where players’ valuations are independently and identically distributed. We derive the explicit ”inverse bid” functions in the case of the uniformly distributed valuations and provide a revenue comparison between the ascending and descending price auctions in this case.

JEL-codes: D44 D82 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic
Date: 2017-01-27
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