Journal Article

Sequential Common-Value Auctions with Asymmetrically Informed Bidders

Johannes Hörner and Julian Jamison

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 75, issue 2, pages 475-498
Published in print April 2008 | ISSN: 0034-6527
Published online April 2008 | e-ISSN: 1467-937X | DOI: https://dx.doi.org/10.1111/j.1467-937X.2008.00476.x
Sequential Common-Value Auctions with Asymmetrically Informed Bidders

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  • Information, Knowledge, and Uncertainy
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We study an infinitely repeated first-price auction with common values. We focus on one-sided incomplete information, in which one bidder learns the objects' value, which itself does not change over time. Learning by the uninformed bidder occurs only through observation of the bids. The proprietary information is eventually revealed, and the seller extracts essentially the entire rent (for large discount factors). Both players' pay-offs tend to 0 as the discount factor tends to 1. However, the uninformed bidder does relatively better than the informed bidder. We discuss the case of two-sided incomplete information and argue that, under a Markovian refinement, the outcome is pooling as information is revealed only insofar as it does not affect prices.

Keywords: D44; D82

Journal Article.  15881 words.  Illustrated.

Subjects: Information, Knowledge, and Uncertainy ; Market Structure and Pricing

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