Information Acquisition in Interdependent Value Auctions

Dirk Bergemann, Xianwen Shi and Juuso Välimäki

No 1619, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We consider an auction environment with interdependent values. Each bidder can learn her payoff type through costly information acquisition. We contrast the socially optimal decision to acquire information with the equilibrium solution in which each agent has to privately bear the cost of information acquisition. In the context of the generalized Vickrey-Clarke-Groves mechanism, we establish that the equilibrium level exceeds the socially optimal level of information with positive interdependence. The individual decisions to acquire information are strategic substitutes. The difference between the equilibrium and the efficient level of information acquisition is increasing in the interdependence of the bidders' valuations and decreasing in the number of informed bidders.

Keywords: Vickrey-Clarke-Groves mechanism; Information acquisition; Strategic substitutes; Informational efficiency (search for similar items in EconPapers)
JEL-codes: C72 C73 D43 D83 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2007-07
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Published in Journal of the European Economic Association (March 2009), 7(1): 61-89

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Related works:
Journal Article: Information Acquisition in Interdependent Value Actions (2009)
Working Paper: Information Acquisition in Interdependent Value Auctions (2008)
Working Paper: Information Acquisition in Interdependent Value Auctions (2007)
Working Paper: Information Acquisition in Interdependent Value Auctions (2007)
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