Optimal Information Disclosure in Auctions

Dirk Bergemann, Benjamin Brooks and Stephen Morris
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Benjamin Brooks: Dept. of Economics, University of Chicago

No 2318, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We characterize the revenue-maximizing information structure in the second price auction. The seller faces a classic economic trade-o¤: providing more information improves the efficiency of the allocation but also creates higher information rents for bidders. The information disclosure policy that maximizes the revenue of the seller is to fully reveal low values (where competition will be high) but to pool high values (where competition will be low). The size of the pool is determined by a critical quantile that is independent of the distribution of values and only dependent on the number of bidders. We discuss how this policy provides a rationale for conflation in digital advertising.

JEL-codes: D44 D47 D83 D84 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2021-12
New Economics Papers: this item is included in nep-com, nep-des, nep-gth, nep-mic and nep-reg
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Published in American Economic Review (September 2022)

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