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A Common-Value Auction with State-Dependent Participation

Author

Listed:
  • Stephan Lauermann

    (University of Bonn, Department of Economics)

  • Asher Wolinsky

    (Northwestern University, Department of Economics)

Abstract

This paper analyzes a common-value, first-price auction with state-dependent participation. The number of bidders, which is unobservable to them, depends on the true value. For participation patterns with many bidders in each state, the bidding equilibrium may be of a “pooling” type – with high probability, the winning bid is the same across states and is below the ex-ante expected value – or of a “partially revealing“ type – with no significant atoms in the winning bid distribution and an expected winning bid increasing in the true value. Which of these forms will arise is determined by the likelihood ratio at the top of the signal distribution and the participation across states. We fully characterize this relation and show how the participation pattern determines the extent of information aggregation by the price.

Suggested Citation

  • Stephan Lauermann & Asher Wolinsky, 2021. "A Common-Value Auction with State-Dependent Participation," ECONtribute Discussion Papers Series 103, University of Bonn and University of Cologne, Germany.
    • Handle: RePEc:ajk:ajkdps:103
    as

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    File URL: https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_103_2021.pdf
    File Function: First version, 2021
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    References listed on IDEAS

    as
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    5. Milgrom, Paul R, 1979. "A Convergence Theorem for Competitive Bidding with Differential Information," Econometrica, Econometric Society, vol. 47(3), pages 679-688, May.
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    7. Athey, Susan, 2001. "Single Crossing Properties and the Existence of Pure Strategy Equilibria in Games of Incomplete Information," Econometrica, Econometric Society, vol. 69(4), pages 861-889, July.
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