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Mid-auction information acquisition

Author

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  • Leonardo Rezende

    (PUC-Rio)

Abstract

An English auction is studied in which bidders can acquire information during the bidding process, allowing for heterogeneity both in ex-ante private information and the cost of information acquisition. The best response has a simple characterization where the optimal information acquisition time is unaffected by the other bidders’ strategies. We prove the existence of an equilibrium in a novel way by characterizing it as a fixed point in the space of bid distributions rather than the space of bid functions. Furthermore, we show that when bidders have homogeneous ex-ante private information about valuations: (1) The English auction generates more revenue than the Vickrey auction when the number of bidders is sufficiently large; and (2) the English auction is more efficient than the Vickrey auction when the information acquisition cost are relatively small. We present numerical simulations that show that these effects can be large. Our findings provide an additional explanation for the popularity of the English auction, even in settings where the bidders’ valuations are independent.

Suggested Citation

  • Leonardo Rezende, 2018. "Mid-auction information acquisition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(3), pages 751-780, May.
    • Handle: RePEc:spr:joecth:v:65:y:2018:i:3:d:10.1007_s00199-017-1038-z
    DOI: 10.1007/s00199-017-1038-z
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    References listed on IDEAS

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    Cited by:

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    2. Hanzhe Zhang, 2021. "Prices versus auctions in large markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 72(4), pages 1297-1337, November.
    3. Lin Zhang & Yiting Zhao & Yuan Liu & Jinfang Qian, 2021. "Does the Land Price Subsidy Still Exist against the Background of Market Reform of Industrial Land?," Land, MDPI, vol. 10(9), pages 1-31, September.

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    More about this item

    Keywords

    Dynamic auctions; Information acquisition; English auctions;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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