On the informational inefficiency of discriminatory price auctions

Matthew Jackson and Ilan Kremer

No 1191, Working Papers from California Institute of Technology, Division of the Humanities and Social Sciences

Abstract: We analyze bidding behavior in large discriminatory price auctions where the number of objects is a non-trivial proportion of the number of bidders. Bidders observe private signals that are affiliated with the common value. We show that the average price in the auction is biased downward from the expected value of the objects, even in the competitive limit. In particular, we show that conditional on relatively low signals, bidders bid the expected value of the objects conditional n their information and winning; while bids at higher signals flatten out and are below the expected value conditional on winning.

Keywords: Auction; Competition; Discriminatory Auction; Asymptotic Efficiency; Efficient Markets; Efficient Market Hypothesis (search for similar items in EconPapers)
Pages: 12 pages
Date: 2004-01
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Published in Journal of Economic Theory, V. 132, #1, (2007) pp. 507-517

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Journal Article: On the informational inefficiency of discriminatory price auctions (2007)
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