On Information and Competition in Private Value Auctions

36 Pages Posted: 20 Jul 2007

See all articles by Juan-José Ganuza

Juan-José Ganuza

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

José Penalva

Universidad Carlos III, Madrid - Business Economics Department

Date Written: January 2006

Abstract

How much information does an auctioneer want bidders to have in a private value environment? We address this question using a novel approach to ordering information structures based on the property that in private value settings more information leads to a more disperse distribution of buyers' updated expected valuations. We define the class of precision criteria following this approach and different notions of dispersion, and relate them to existing criteria of informativeness. Using supermodular precision, we obtain three results: (1) a more precise information structure yields a more efficient allocation; (2) the auctioneer provides less than the efficient level of information since more information increases bidder informational rents; (3) there is a strategic complementarity between information and competition, so that both the socially efficient and the auctioneer's optimal choice of precision increase with the number of bidders, and both converge as the number of bidders goes to infinity.

Keywords: Auctions, Competition, Private Values, Informativeness Criteria

JEL Classification: D44, D82, D83

Suggested Citation

Ganuza, Juan and Penalva, José, On Information and Competition in Private Value Auctions (January 2006). Available at SSRN: https://ssrn.com/abstract=1001885 or http://dx.doi.org/10.2139/ssrn.1001885

Juan Ganuza (Contact Author)

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
(34-93) 542 27 19 (Phone)
(34-98) 542 17 46 (Fax)

José Penalva

Universidad Carlos III, Madrid - Business Economics Department ( email )

Calle Madrid 126
Getafe, 28903
Spain

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