First Price Auctions with General Information Structures: Implications for Bidding and Revenue

58 Pages Posted: 9 May 2016 Last revised: 21 May 2016

See all articles by Dirk Bergemann

Dirk Bergemann

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

Benjamin A. Brooks

Princeton University - Department of Economics

Stephen Morris

Princeton University - Department of Economics

Multiple version iconThere are 7 versions of this paper

Date Written: May 6, 2016

Abstract

We explore the impact of private information in sealed-bid first-price auctions. For a given symmetric and arbitrarily correlated prior distribution over values, we characterize the lowest winning-bid distribution that can arise across all information structures and equilibria. The information and equilibrium attaining this minimum leave bidders indifferent between their equilibrium bids and all higher bids. Our results provide lower bounds for bids and revenue with asymmetric distributions over values. We report further analytic and computational characterizations of revenue and bidder surplus including upper bounds on revenue. Our work has implications for the identification of value distributions from data on winning bids and for the informationally robust comparison of alternative bidding mechanisms.

Keywords: First-price auction, information structure, Bayes correlated equilibrium, private values, interdependent values, common values, revenue, surplus, welfare bounds, reserve price

JEL Classification: C72, D44, D82, D83

Suggested Citation

Bergemann, Dirk and Brooks, Benjamin A. and Morris, Stephen Edward, First Price Auctions with General Information Structures: Implications for Bidding and Revenue (May 6, 2016). Cowles Foundation Discussion Paper No. 2018R2. Available at SSRN: https://ssrn.com/abstract=2777027 or http://dx.doi.org/10.2139/ssrn.2777027

Dirk Bergemann (Contact Author)

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

Benjamin A. Brooks

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Stephen Edward Morris

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

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