Optimal Auctions with Information Acquisition

This paper studies optimal auction design in a private value setting with endogenous information acquisition. First, we develop a general framework for modeling information acquisition when a seller wants to sell an object to one of several potential buyers who can each gather information about their valuations prior to participation. We then show that under certain conditions, standard auctions with a reserve price remain optimal, but the optimal reserve price lies between the mean valuation and the standard reserve price in Myerson (1981). We provide sufficient conditions under which the value of information to the seller is positive, and also characterize the necessary and sufficient conditions under which equilibrium information acquisition in private value auctions is socially excessive. The key to the analysis is the insight that buyer incentives to acquire information become stronger as the reserve price moves toward the mean valuation.optimal auctions, information acquisition, rotation order, informational efficiency

Why Government Bonds Are Sold by Auction and Corporate Bonds by Posted-Price Selling

When information is costly, a seller may wish to prevent prospective buyers from acquiring information, for the cost of information acquisition is ultimately borne by the seller. A seller can achieve the desired prevention of information acquisition through posted-price selling, by offering prospective buyers a discount that is such as to deter them from gathering information. No such prevention is possible in the case of an auction. Clearly, a discount is costly to the seller. We establish the result that the seller prefers posted-price selling when the cost of information acquisition is high, and auctions when it is low. We view corporate bonds as an instance of the former case, and government bonds as an instance of the latter.Government Bonds; Corporate Bonds; Auctions; Posted-Price Selling; Costly Information

Competition Between Auctions

Even though auctions are capturing an increasing share of commerce, they are typically treated in the theoretical economics literature as isolated. That is, an auction is typically treated as a single seller facing multiple buyers or as a single buyer facing multiple sellers. In this paper, we review the state of the art of competition between auctions. We consider three different types of competition: competition between auctions, competition between formats, and competition between auctioneers vying for auction traffic. We highlight the newest experimental, statistical and analytical methods in the analysis of competition between auctions.auctions, bidding, competition, auction formats, auction houses