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Incomplete Information, High-Low Bidding and Public Information in First Price Auctions

Author

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  • Tom K. Lee

    (Department of Economics, University of California, San Diego, La Jolla, California 92093)

Abstract

High-low bidding refers to auctions of a series of objects where for a subset of the auctioned objects one of two buyers bids high on some objects and low on others while the other buyer does the reverse. This paper shows that high-low bidding does not imply collusive behavior among buyers. In particular, through a formal modeling of a noncooperative game of information acquisition and bidding decisions, it shows that high-low bidding can be obtained. The paper also demonstrates that if the cost of information to a seller is less than the equilibrium joint expected information cost of the buyers, then it pays the seller to provide public information. Finally, if the provision of public information is not feasible but a seller can know whether buyers have acquired information, then it pays the seller to make known to the buyers and to pursue a policy that just prior to the start of an auction the seller will announce which buyer has acquired information.

Suggested Citation

  • Tom K. Lee, 1984. "Incomplete Information, High-Low Bidding and Public Information in First Price Auctions," Management Science, INFORMS, vol. 30(12), pages 1490-1496, December.
    • Handle: RePEc:inm:ormnsc:v:30:y:1984:i:12:p:1490-1496
    DOI: 10.1287/mnsc.30.12.1490
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    Cited by:

    1. repec:fth:calaec:17-97 is not listed on IDEAS
    2. Kolstad, Charles D., 1997. "A Model of Auction Equilibrium with Costly Information Acquisition," University of California at Santa Barbara, Economics Working Paper Series qt4502p3n4, Department of Economics, UC Santa Barbara.
    3. Tian, Guoqiang & Xiao, Mingjun, 2007. "Endogenous Information Acquisition on Opponents' Valuations in Multidimensional First Price Auctions," MPRA Paper 41214, University Library of Munich, Germany, revised Jan 2010.
    4. Li, Shengyu & Tian, Guoqiang, 2008. "Equilibria in Second Price Auctions with Information Acquisition," MPRA Paper 41210, University Library of Munich, Germany.
    5. Guzman, Rolando M & Kolstad, Charles D., 1997. "Auction Equilibrium with Costly Information Acquisition," University of California at Santa Barbara, Economics Working Paper Series qt4w0787ng, Department of Economics, UC Santa Barbara.
    6. repec:cdl:ucsbec:17-97 is not listed on IDEAS

    More about this item

    Keywords

    games/group decisions bidding;

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