Should Auctions Be Transparent?

71 Pages Posted: 13 Aug 2010

See all articles by Dirk Bergemann

Dirk Bergemann

Yale University - Cowles Foundation - Department of Economics; Yale University - Cowles Foundation

Johannes Horner

Yale University - Cowles Foundation

Multiple version iconThere are 4 versions of this paper

Date Written: August 12, 2010

Abstract

We investigate the role of market transparency in repeated first-price auctions. We consider a setting with private and independent values across bidders. The values are assumed to be perfectly persistent over time.

We analyze the first-price auction under three distinct disclosure regimes regarding the bid and award history. Of particular interest is the minimal disclosure regime, in which each bidder only learns privately whether he won or lost the auction at the end of each round. In equilibrium, the winner of the initial auction lowers his bids over time, while losers keep their bids constant, in anticipation of the winner’s lower future bids. This equilibrium is efficient, and all information is eventually revealed. Importantly, this disclosure regime does not give rise to pooling equilibria.

We contrast the minimal disclosure setting with the case in which all bids are public, and the case in which only the winner’s bids are public. In these settings, an inefficient pooling equilibrium with low revenues always exists with a sufficiently large number of bidders.

Keywords: First Price Auction, Repeated Auction, Private Bids, Information Revelation

JEL Classification: D44, D82, D83

Suggested Citation

Bergemann, Dirk and Horner, Johannes, Should Auctions Be Transparent? (August 12, 2010). Cowles Foundation Discussion Paper No. 1764. Available at SSRN: https://ssrn.com/abstract=1657947 or http://dx.doi.org/10.2139/ssrn.1657947

Dirk Bergemann

Yale University - Cowles Foundation - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States
203-432-3592 (Phone)
203-432-2128 (Fax)

HOME PAGE: http://www.econ.yale.edu/~dirk/

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Johannes Horner (Contact Author)

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
80
rank
188,797
Abstract Views
658
PlumX Metrics