Bidder Disclosure and Entry Deterrence in Second-Price Auctions

Tiago Botelho () and Felipe Shalders ()

No 2026_21, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: We study disclosure by an incumbent bidder in a second-price auction with costly entry. Before a potential entrant decides whether to enter and learn his value, the incumbent commits to a binary disclosure rule about her own value. In equilibrium, the incumbent chooses an informative threshold rule: low reported values induce entry, while high reported values deter it. Under truthful bidding, disclosure does not weaken the incumbent’s bidding incentives. Instead, it changes the entrant’s expected surplus from participating. As a result, incumbent disclosure lowers expected seller revenue relative to the no-communication benchmark.

Keywords: Second-Price Auctions; Information Disclosure; Costly Entry; Entry Deterrence (search for similar items in EconPapers)
JEL-codes: D44 D82 D83 (search for similar items in EconPapers)
Date: 2026-08-14
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