First Price Auctions with General Information Structures: Implications for Bidding and Revenue
58 Pages Posted: 9 May 2016 Last revised: 21 May 2016
Date Written: May 6, 2016
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
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