Competitive Bidding in Auctions with Private and Common Values

Abstract

The objects for sale in most auctions possess both private and common value elements. This salient feature has not yet been incorporated into a strategic analysis of equilibrium bidding behaviour. This paper reports such an analysis for a stylised model in which bidders receive a private value signal and an independent common value signal. We show that more uncertainty about the common value has a negative effect on efficiency. Information provided by the seller decreases uncertainty, which raises efficiency and seller's revenues. Efficiency and revenues are also higher when more bidders enter the auction. This discussion paper has resulted in a publication in The Economic Journal , 2003, 113(489), 598-613.Auctions; inefficiencies; information disclosure; competition

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Research Papers in Economics

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Last time updated on 10/24/2014

This paper was published in Research Papers in Economics.

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