First Price Auctions with General Information Structures: Implications for Bidding and Revenue

Dirk Bergemann, Benjamin Brooks and Stephen Morris

No 2018, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: This paper explores the consequences of information in sealed bid first price auctions. For a given symmetric and arbitrarily correlated prior distribution over valuations, we characterize the set of possible outcomes that can arise in a Bayesian equilibrium for some information structure. In particular, we characterize maximum and minimum revenue across all information structures when bidders may not know their own values, and maximum revenue when they do know their values. Revenue is maximized when buyers know who has the highest valuation, but the highest valuation buyer has partial information about others' values. Revenue is minimized when buyers are uncertain about whether they will win or lose and incentive constraints are binding for all upward bid deviations. We provide further analytic results on possible welfare outcomes and report computational methods which work when we do not have analytic solutions. Many of our results generalize to asymmetric value distributions. We apply these results to study how entry fees and reserve prices impact the welfare bounds.

Keywords: First price auction; Information structure; Bayes correlated equilibrium; Private values; Interdependent values; Common values; Revenue; surplus; Welfare bounds; Reserve price; Entry fee (search for similar items in EconPapers)
JEL-codes: C72 D44 D82 D83 (search for similar items in EconPapers)
Pages: 101 pages
Date: 2015-08
New Economics Papers: this item is included in nep-cmp, nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: First‐Price Auctions With General Information Structures: Implications for Bidding and Revenue (2017)
Working Paper: First Price Auctions with General Information Structures: Implications for Bidding and Revenue (2017)
Working Paper: First Price Auctions with General Information Structures: Implications for Bidding and Revenue (2016)
Working Paper: First Price Auctions with General Information Structures: Implications for Bidding and Revenue (2016)
Working Paper: First Price Auctions with General Information Structures: Implications for Bidding and Revenue (2015)
Working Paper: First Price Auctions with General Information Structures: Implications for Bidding and Revenue (2015)
Working Paper: First Price Auctions with General Information Structures: Implications for Bidding and Revenue (2015)
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