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Ignorance Is Bliss: Matching in Auctions with an Uninformed Seller

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  • Lamping, Jennifer

Abstract

In many auctions, matching between the bidder and seller raises the value of the contract for both parties. However, information about the quality of the match may be incomplete. We consider the case in which each bidder observes the quality of his match with the seller but the seller does not observe the quality of his matches with the bidders. Our objective is to determine whether it is in the seller's interest to observe the matches before selecting the winner. It is shown that the seller’s value for the information may be negative: the seller’s knowledge of the matches generates an asymmetry across bidders which depresses bids. The more matching matters, the greater the penalty associated with observing the matches.

Suggested Citation

  • Lamping, Jennifer, 2008. "Ignorance Is Bliss: Matching in Auctions with an Uninformed Seller," MPRA Paper 24374, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:24374
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    Cited by:

    1. Lamping, Jennifer, 2007. "The Value of Information in Auctions with Default Risk," MPRA Paper 24375, University Library of Munich, Germany.
    2. Lamping, Jennifer, 2008. "The Value of Commitment in Auctions with Matching," MPRA Paper 24373, University Library of Munich, Germany.

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    More about this item

    Keywords

    Asymmetries; Auctions; Auction Theory; Bidding; Information Revelation; Matching; Signaling;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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