Auctions and Informaton Acquisition: Sealed-bid or Dynamic Formats?

Olivier Compte and Philippe Jehiel ()
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Olivier Compte: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique

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Abstract: The value of an asset is generally not known a priori, and it requires costly investments to be discovered. In such contexts with endogenous information acquisition, which selling procedure generates more revenues? We show that dynamic formats, such as ascending-price or multistage auctions, perform better than their static counterpart. This is because dynamic formats allow bidders to observe the number of competitors left throughout the selling procedure. Thus, even if competition appears strong ex ante, it may turn out to be weak along the dynamic format, thereby making the option to acquire information valuable. This very possibility also induces the bidders to stay longer in the auction, just to learn about the state of competition. Both effects boost revenues, and our analysis provides a rationale for using dynamic formats rather than sealed-bid ones.

Date: 2007-06
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Citations: View citations in EconPapers (12)

Published in RAND Journal of Economics, 2007, 38 (2), pp.355-372. ⟨10.1111/j.1756-2171.2007.tb00072.x⟩

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Related works:
Journal Article: Auctions and information acquisition: sealed bid or dynamic formats? (2007)
Working Paper: Auctions and Informaton Acquisition: Sealed-bid or Dynamic Formats? (2007)
Working Paper: Auctions and Information acquisition: Sealed-bid or Dynamic Formats? (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:halshs-00754227

DOI: 10.1111/j.1756-2171.2007.tb00072.x

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