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Information Asymmetries in Common-Value Auctions with Discrete Signals

Published: 15 June 2015 Publication History

Abstract

We consider common-value hybrid auctions among two asymmetrically informed bidders, where the winning bidder pays his bid with some positive probability k and the losing bid otherwise. Under the assumption of discrete and affiliated signals, we give an explicit characterization of the (unique) equilibrium, based on a simple recurrence relation, which gives rise to a linear-time algorithm for explicitly computing the equilibrium. By analyzing the execution of the algorithm, we derive several insights about the equilibrium structure. First, we show that equilibrium revenue is decreasing in k, and that the limit second-price equilibrium selected as k->0 has highest revenue, in stark contrast to the revenue collapse of the second-price auction predicted by the trembling-hand equilibrium selection of Abraham et al. We further show that the Linkage Principle can fail to hold even in a pure first-price auction with binary signals: public revelation of a signal to both bidders may decrease the auctioneer's revenue. Lastly, we analyze the effects of public acquisition of additional information on bidder utilities and exhibit cases in which both bidders strictly prefer for a specific bidder to receive additional information.

Cited By

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  • (2018)On Designing Optimal Data Purchasing Strategies for Online Ad AuctionsProceedings of the 17th International Conference on Autonomous Agents and MultiAgent Systems10.5555/3237383.3237927(1522-1530)Online publication date: 9-Jul-2018
  • (2018)Targeting and signaling in ad auctionsProceedings of the Twenty-Ninth Annual ACM-SIAM Symposium on Discrete Algorithms10.5555/3174304.3175468(2545-2563)Online publication date: 7-Jan-2018
  • (2017)Auctions with Dynamic Costly Information AcquisitionOperations Research10.1287/opre.2016.155865:1(130-144)Online publication date: Feb-2017
  • Show More Cited By

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Published In

cover image ACM Conferences
EC '15: Proceedings of the Sixteenth ACM Conference on Economics and Computation
June 2015
852 pages
ISBN:9781450334105
DOI:10.1145/2764468
Permission to make digital or hard copies of part or all of this work for personal or classroom use is granted without fee provided that copies are not made or distributed for profit or commercial advantage and that copies bear this notice and the full citation on the first page. Copyrights for third-party components of this work must be honored. For all other uses, contact the Owner/Author.

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Association for Computing Machinery

New York, NY, United States

Publication History

Published: 15 June 2015

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Author Tags

  1. common value auctions
  2. information asymmetry

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Funding Sources

  • ONR
  • NSF

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EC '15
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EC '15: ACM Conference on Economics and Computation
June 15 - 19, 2015
Oregon, Portland, USA

Acceptance Rates

EC '15 Paper Acceptance Rate 72 of 220 submissions, 33%;
Overall Acceptance Rate 664 of 2,389 submissions, 28%

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The 25th ACM Conference on Economics and Computation
July 7 - 11, 2025
Stanford , CA , USA

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Cited By

View all
  • (2018)On Designing Optimal Data Purchasing Strategies for Online Ad AuctionsProceedings of the 17th International Conference on Autonomous Agents and MultiAgent Systems10.5555/3237383.3237927(1522-1530)Online publication date: 9-Jul-2018
  • (2018)Targeting and signaling in ad auctionsProceedings of the Twenty-Ninth Annual ACM-SIAM Symposium on Discrete Algorithms10.5555/3174304.3175468(2545-2563)Online publication date: 7-Jan-2018
  • (2017)Auctions with Dynamic Costly Information AcquisitionOperations Research10.1287/opre.2016.155865:1(130-144)Online publication date: Feb-2017
  • (2017)Sequential Posted-Price Mechanisms with Correlated ValuationsACM Transactions on Economics and Computation10.1145/31570855:4(1-39)Online publication date: 22-Dec-2017
  • (undefined)First Price Auctions with General Information Structures: Implications for Bidding and RevenueSSRN Electronic Journal10.2139/ssrn.2695045

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