A Note on Revenue Effects of Asymmetry in Private-Value Auctions

17 Pages Posted: 14 Feb 2002

See all articles by Todd R. Kaplan

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: February 2002

Abstract

We formulate a way to study whether the asymmetry of buyers (in the sense of having different prior probability distributions of valuations) is helpful to the seller in private-value auctions (asked first by Cantillon [2001]). In our proposed formulation, this question corresponds to two important questions previously asked: Does a first-price auction have higher revenue than a second-price auction when buyers have asymmetric distributions (asked by Maskin and Riley [2000])? And does a seller enhance revenue by releasing information (asked by Milgrom and Weber[1982])? This is shown by constructing two Harsanyi games of incomplete information each having the same ex-ante distribution of valuations but in one beliefs are symmetric while in the other beliefs are sometimes asymmetric. Our main result is that answers to all three questions coincide when values are independent and are related when values are affiliated.

Keywords: asymmetric auctions, asymmetric beliefs, affiliation, linkage principle

JEL Classification: C72, D44, D82

Suggested Citation

Kaplan, Todd R. and Zamir, Shmuel, A Note on Revenue Effects of Asymmetry in Private-Value Auctions (February 2002). Available at SSRN: https://ssrn.com/abstract=300401 or http://dx.doi.org/10.2139/ssrn.300401

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)

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