The Strategic Use of Seller Information in Private-Value Auctions

Hebrew University, Center For Rationality Working Paper No. 221

42 Pages Posted: 21 Aug 2000  

Todd R. Kaplan

University of Exeter Business School - Department of Economics; University of Haifa - Department of Economics

Shmuel Zamir

Hebrew University - Center for the Study of Rationality

Date Written: July 2000

Abstract

In the framework of a first-price private-value auction, we study the seller as a player in a game with the buyers in which he has private information about their realized valuations. We find that depending upon his information, set of signals, and commitment power, he may strategically transmit messages to buyers in order to increase his revenue. In an environment where the seller knows the rankings and lacks any commitment power, we find that the seller is unable to exploit his information. However, in an environment where the seller knows the realized valuations and can credibly announce either the true rankings or the true values (or announce nothing at all) but cannot commit as to which of these truthful messages to announce, then it is indeed possible to increase his revenue. If the seller, in addition, can commit to the full signaling strategy, then his expected revenue will be even higher. We believe that this line of research is fruitful for both better understanding behavior in auctions and finding paths to higher seller revenue.

Keywords: Information, auctions, information transmission, cheap talk, verifiability

JEL Classification: D44, C72

Suggested Citation

Kaplan, Todd R. and Zamir, Shmuel, The Strategic Use of Seller Information in Private-Value Auctions (July 2000). Hebrew University, Center For Rationality Working Paper No. 221. Available at SSRN: https://ssrn.com/abstract=235269 or http://dx.doi.org/10.2139/ssrn.235269

Todd R. Kaplan (Contact Author)

University of Exeter Business School - Department of Economics ( email )

Streatham Court
Exeter, EX4 4RJ
United Kingdom
+44 13 9226 3237 (Phone)

University of Haifa - Department of Economics

Haifa 31905
Israel

Shmuel Zamir

Hebrew University - Center for the Study of Rationality ( email )

Hebrew University
Jerusalem 91904
Israel
+972 2-6586486 (Phone)

Paper statistics

Downloads
159
Rank
152,428
Abstract Views
897